Sarbanes-Oxley Costs Exceed Benefits

coondoggie writes "Two years of compliance with the Sarbanes-Oxley Act (SOX) have shored up corporate accounting practices - but with lopsided costs compared to benefits gained. Bill Gradison, acting chairman of the Public Company Accounting Oversight Board (PCAOB), said that guidance the SEC issued last year and PCAOB's latest auditing standard may not be enough to clarify the rules that govern the reporting and auditing of internal controls. 'Based on the information we already have, it would seem that some further changes may be in order,' Gradison said."

Re:Misleading summary

[Bob_Robertson]

Exactly. This article from November says exactly the same thing:

http://blog.mises.org/archives/004345.asp [mises.org]

"In contrast, the CEO of Georgia Pacific explained that his company sold out to private Koch Industries in order to avoid mounting Sarbox costs."

and

"No doubt, a company that had poor controls may have improved them in order to comply with Sarbox. This does not mean that U.S. businesses in aggregate benefited from Sarbox. A law mandating a 45% increase in marketing spending might help some companies too, but it would cripple most others. Even companies with superior internal controls were forced by this perverse law to spend more money on internal controls."

Bring back Glass-Steagall

[Raul654]

I'm 100% in favor of bringing back the Glass-Steagall Act [wikipedia.org], a useful bit of post-Depression legislation that would probably have prevented Enron (or, at the very least, significantly reduced the overall damage). Glass-Steagall ruled that a company could not do both finincial analysis and investment banking, because it's a conflict of interest to be evalauting the same companies you have intestments in. Thanks to the Republicans, Glass-Steagall was repealed in 1999 (although, to be fair, Bill Clinton did sign the law repealing it).

boondoggle

[eronysis]

I believe SOx was indeed well intended, however if you have ever dealt with these auditors you would quickly realize that in practice SOx ended up as a boondoggle to a few very large accounting firms. I have actually dealt with "auditors" who requested(upon me asking about where he was based and that I speak the language) I speak in spanish, as they were based in mexico city on contract...He then asked for a screenshot of /etc/passwd, not the file itself mind you a screenshot of a pwd at the path! Not that the file would do much good as my boxes are all trusted . Idiots driving idiots

Re:Misleading summary

[synx]

I think the parent was fairly clear - you are not getting what you think you're paying for. You are _not_ getting a honest accounting of a business. Only the appearance of one. Remember, that the external auditing companies that are being paid for this stuff are the exact same ones that were complicit in the Enron thing.

Some of the SOX stuff is reasonable - although most large companies are already doing that. But some of the other parts are more or less insane. Like the infamous section 404 - everytime I push a particular piece of software I need to audit that. I need to do extra paperwork that does not really improve anything, since I'm not doing anything new but filing out some bit of electronic retardedness.

The section 404 stuff is ridiculous. Why do we need individual audits of software pushes? I push a 1 line change, I need to fill out a SOX thing.

In the end, all the big problems happen at the exec/policy/corp level. And those people are always part of the "good-old-boys club" (Not girls, BOYS. Girls not allowed. You know, period stuff and all of that.). If you are part of the club, you don't get punished, unless you severely embarrass everyone else as Lay and Enron did.

We need better corporate governance. This legislation was ill concieved and simpleminded. Just the way the crafters wanted it - because SOX does not prevent Enron 2. Just the way it was designed. Looks like it should be effective though.

Re:Misleading summary

[Luscious868]

Enough with the "evil oil companies" bullshit. They don't make anywhere near the amount of money that oil producing nations themselves make when crude prices are high. Saudi Arabia will make $55 billion dollars more this year than they made last year due to the increased price of crude. 55 billion more than they made last year. That is about 27.5 billion dollars more a quarter than they made last year. Exxon-Mobile's profits this last quarter were only 3.8 billion. Not 3.8 billion more than the same quarter last year. 3.8 billion. That is a pittance compared to what Saudi Arabia and other oil producing nations (13 out of the top 15 being dictatorships) make. Oil companies do not set the price of oil. It's commodity and the market sets the price. There are supply and demand issues that are affecting the price of oil. There is a limited supply and ever increasing demand. China and India now use the same amount of oil that the USA used 10 years ago. The oil companies don't have any control over that. OPEC does. They could increase output if they wanted to. They don't want to. They market will bear these high prices, so there is no real incentive for them to do anything about it. Oil companies make an average of 9 cents a gallon on gasoline. 9 cents. I'm sure you don't believe that but the wonderful thing about our capitalist system is that these are publicly traded companies and with a little effort you can go look it up. The government, on the other hand, makes more than twice that in taxes. I don't here anyone talking about a windfall profits rebate from the government. Do you know how much more they are taking in gasoline taxes than they were a few years ago? You liberals don't bitch and moan about that. I don't hear people bitch and moan when countries like Venezuela and Bolivia nationalize their oil fields which results in reduced and inefficient production of oil which drives prices up. I hear them cheer it. I don't hear people bitch and moan when environmentalists prevent drilling in a small area of ANWR which limits our supply and drives prices up. I hear them cheer it. I don't here people bitch and moan when the government taxes ethanol imports to "protect" our farmers which drives gasoline prices up because the ethanol from corn that we can produce here costs more than the ethanol produced outside the country from sugar cane and other products in places like Brazil. I hear them cheer it. I don't here people bitch and moan when additional drilling isn't allowed to occur in the Gulf of Mexico which further limits our supply. I hear them cheer it. I don't hear people bitch and moan when drilling isn't allowed in the Great Lakes which again limits our supply. I hear them cheer it. I don't hear people bitch and moan when environmental regulations become so restrictive that oil companies are unable to open new refineries, which limits supply. I hear them cheer it. I don't hear people bitch and moan when individual states choose to dictate to the oil companies which mixtures of gasoline are allowed to be sold in the state which results in a more complex distribution network and drives prices up. I hear them cheer it. Yet you all scream bloody murder at the oil companies when all of the stupid decisions you make over the years finally come back to bite you in the ass in the form of increased oil and gasoline prices. You want to know who is responsible for the current supply crunch my friends? Look in the mirror. If we had made smarter decisions 10 years ago by allowing additional domestic drilling and allowing new gasoline refineries to open we wouldn't be in the position that we are in today. The fact of the matter is that we need today, and will continue to need for the next 10 to 20 years, ever increasing amounts of oil. Demand in China and India will only increase as well. If we do not increase supplies of oil domestically and increase refining capacity then we will continue to be bent over a barrel. By conservative estimates, we are at least 25 years away from transitioning to a primarily alternative energ

Re:Misleading summary

[Senjutsu]

Game theory is based upon zero-sum outcomes.

There goes any shred of credibility you've been clinging to. Zero-Sum games are but one branch of games studied by Game Theory.