An article in today’s Compliance Week, Koss Fraud Spotlights Small Filers’ Internal Control Issues (subscription required), quotes me on internal controls and the auditors as it relates to the huge fraud committed by VP of Finance Sue Sachdeva at Koss Corp (NASDAQ:KOSS).
I’m no fan of Sarbanes-Oxley because I believe it was ridiculously expensive, and hasn’t really produced any meaningful results. Fraud is just as rampant as before SOX became law, and the only thing companies have to show for it is a huge bill from auditors and consultants. Continue reading
My friend Francine McKenna wrote yesterday on her blog, re:The Auditors, about what Sarbanes-Oxley has accomplished:
My contention is that Sarbanes-Oxley has at least raised the tone and tenor of the conversation about internal controls and about common sense, tried and true, reasonable practices for financial reporting to shareholders and other stakeholders. Sarbanes-Oxley has raised the expectations, to an appropriately high level, of corporate governance and ethical, non- self-serving behavior of corporate executives. Sarbanes-Oxley has given stakeholders the tools to bring the hammer down on irresponsible, non-responsive, fat headed, cigar chomping, belligerent, insular, seemingly untouchable “big swinging sticks.” The Tone at the Top as improved in most major corporations and their professional advisors, if not by design then by default – the fear of prosecution. Continue reading
Auditors and consultants around the country would like to string me up for my vocal dislike of Sarbanes-Oxley. I frequently moan that the cost is too high, the results are too poor, and consumers are fooled into thinking there’s been a solution to the fraud problem when there hasn’t.
But Sarbanes-Oxley consulting is a billion-dollar industry.A 2003 study indicated that the total annual cost of complying with Section 404 of Sarbanes Oxley was over $1 billion. An average company spent $1.7 million on SOX compliance last year.
Auditors and consultants aren’t stupid. That’s a cash cow for them, and they don’t want to lose it. Continue reading
Financial Executives International polled companies for the 7th year in a row to determine how much it costs to comply with Section 404 of the Sarbanes-Oxley Act. This year, they talked to 185 companies with average annual revenues of $4.7 billion.
The total average cost of compliance was $1.7 million in 2007. This is a decrease from the prior years.
The survey also asked “accelerated filers” (companies with market capitalization above $75 million) about their audit fees for 2007. The total audit fees for these companies averaged $3.6 million, up a bit from 2006. Continue reading
69 auditors have been charged by the Securities and Exchange Commission with issuing audit reports on the financial statements of public companies without first registering with the Public Company Accounting Oversight Board.
The SEC has named 37 unregistered audit firms and 32 audit partners in this violation of the Sarbanes-Oxley Act of 2002. According to the SEC: Continue reading
This week’s Wisconsin Law Journal column takes a look at the Sarbanes-Oxley Act of 2002, which was put into law five years ago. The legislation has done some good things, but many have significant criticisms of it. The law was intended to protect retail investors in public companies by bringing certain standards to the financial reporting process.
Sarbox requires executives to certify financial results and be held accountable for the accuracy of financial data. The legislation also attempted to bring more transparency to the independent audit process. Continue reading
Say it fast five times: Sarbanes-Oxley, Sarbanes-Oxley, Sarbanes-Oxley, Sarbanes-Oxley, Sarbanes-Oxley… If you’re like me, you’re sick of hearing these words.
Lots of people, however, don’t have the first idea what the Sarbanes-Oxley Act of 2002 is really about. I think the public-at-large thinks it’s legislation that stops fraud. That couldn’t be further from the truth.
It is true that Sarbanes-Oxley (also fondly referred to as SOX or SarbOx) was meant to protect investors in public companies. It set forth some standards and certain procedures that public companies are required to abide by.
But the legislation itself requires far less than many people believe it does. At the end of the day, the regulations require companies to document their processes and disclose whether or not their internal controls are working. It doesn’t actually force them to materially improve the internal controls. (See my article What Has Sarbanes-Oxley Done For You Lately? for more of my opinions on this.)
So what does Sarbanes-Oxley require? Continue reading