The ultimate value of SOX so far - has it been worth the costs and turmoil created? Uncertainty as to which kinds of financial-related information need to be controlled and which types of controls are necessary and sufficient to meet the intent of SOX.ģ.
The recurring issues that all our contributors discuss fall into three general categories:Ģ. We are especially pleased to present views from those who are on the front lines of companies having to deal with implementing SOX, not only here in the US but in Europe as well. In this issue, we have focused again on many of these same issues, but now with an experienced, real-world perspective in specifically dealing with SOX in the steady-state operational - rather than startup - phase. In the September 2005 issue of Cutter IT Journal, we focused the debate on the potential value, costs, impacts, and implications of compliance with new governance regulations and laws like Sarbanes-Oxley and Basel II. Similarly, US Treasury Secretary Henry Paulson also noted last November that overlapping regulation and accounting rules such as SOX have placed the US in "danger of creating a thicket of regulation that impedes competitiveness," adding that the country needs to find a "regulatory balance." Even the liberal Congressman Barney Frank, incoming chairman of the House Financial Services Committee, supports the idea that SOX burdens need to be reduced, especially for small companies. On the other hand, this past November, former chairman of the US Federal Reserve Board, Alan Greenspan, voiced his opinion that SOX Section 404 is a "nightmare" that is a "cost creator with no benefit I'm aware " and that it should be completely revamped. For instance, in testimony before the US Congress in September 2006, US Securities and Exchange Commission (SEC) Chairman Christopher Cox said that "while initial implementation efforts resulted in significantly greater-than-anticipated costs, compliance with Section 404 produces significant benefits." Section 404, as you may recall, requires public companies to implement internal controls on their financial transactions and information and for the companies' auditors to certify to the controls' effectiveness.Ĭox called the problems that many companies have reported in regard to implementing Section 404 the one "notable exception" in an otherwise good piece of legislation, while former Congressman Michael Oxley, coauthor of SOX and recently retired chairman of the House Financial Services Committee, blamed the supposed cost problems on "overzealous implementation" by auditors. Even different regulatory agencies within the US government can't seem to agree on whether SOX has been a net gain or loss. Opening StatementĪs the Public Company Accounting Reform and Investor Protection Act of 2002 - better known as Sarbanes-Oxley (SOX) - enters its fifth year, the debate on whether its potential benefits are commensurate with its very real costs unrelentingly continues. It may be costly to implement, but the cost is worth it to ensure trustworthy and transparent financial reporting. It needs radical change, if not outright repeal. SOX is an ongoing nightmare - a cost creator and value destroyer.