What problems is Sarbanes Oxley trying to solve? Thanks. 247



  • Well, let’s see, in the UK they still have something called ‘honor’.
    Wheras in the US, we have supposedly upright(eous) business leaders with a tiny little compensation problem left over from when they didn’t get chosen for the team as little kids.
    Revenge = greed
    Does that clarify it for you?



  • Ross,
    Many thanks for the reply, you have made a point. I am still interested in the crux of the matter. Why legislation, and not the voluntary code, that has really stood the test of time in the UK? Meaning, there are no big corporate scandals in the UK in the recent past, unlike the US. Does the credit then goes to the Combined Code, or is the reason something else?
    Christine



  • The problem with SOX is that it is attempting to combat high level fraud by testing low level systems and controls. :roll:



  • Actually I’m not overly upset with 404, my issue is with the PCAOB AS2. That thing is a pig and imho does not address what 404 is all about. Do we really need to beat up A/P again??? I can see the review of entity wide controls, management overrides, high level accounting policies (rev recognition etc) and GCC’s possibly but most of the rest is simply beating up accounts and processes that are already beat up by other audits.
    When’s the last time a control deficiency in A/P resulted in a restatement? :x
    AS2 simply makes you rush to document and test hundreds of controls rather than focusing on those that MATTER…
    er, that’s my opinion 😄
    Chris.



  • Why legislation, and not the voluntary code, that has really stood the test of time in the UK? Meaning, there are no big corporate scandals in the UK in the recent past, unlike the US. Does the credit then goes to the Combined Code, or is the reason something else?
    Christine
    For many years, auditors have had the ‘privilege’ of self-regulating the profession. The reason for legislation and not a voluntary code is that, after Enron, Worldcom and others, you cannot pretend to build up trust in the markets by allowing again the profession to self-regulate a solution. Auditors have partly lost with these scandals their most valuable capital, which is their reputation. After all, the value of the audit report is directly linked to the reputation of the auditor which issues it. So, if the public investor believes that the auditor is not reliable, then the audit report will not have any credibility neither and the main purpose of auditing will be lost.
    I know it is a very simplified answer, but I think this is one of the points they took into consideration when drafting SOX.



  • IMHO it is the accounting and auditing practices (related to financial reporting) that needs to be improved and reformed…
    I fail to see how applying controls over IT infrastructure will prevent another Enron.



  • Why legislation, and not the voluntary code, that has really stood the test of time in the UK? Meaning, there are no big corporate scandals in the UK in the recent past, unlike the US. Does the credit then goes to the Combined Code, or is the reason something else?
    Christine
    For many years, auditors have had the ‘privilege’ of self-regulating the profession. The reason for legislation and not a voluntary code is that, after Enron, Worldcom and others, you cannot pretend to build up trust in the markets by allowing again the profession to self-regulate a solution. Auditors have partly lost with these scandals their most valuable capital, which is their reputation. After all, the value of the audit report is directly linked to the reputation of the auditor which issues it. So, if the public investor believes that the auditor is not reliable, then the audit report will not have any credibility neither and the main purpose of auditing will be lost.
    I know it is a very simplified answer, but I think this is one of the points they took into consideration when drafting SOX.
    Actually, you could argue that the Enron/Arthur Andersen affair proved that legislation was not necessary to ensure the indepence of external auditors. Arthur Andersen was one of the largest accounting firms in the world, and it totally collapsed. Not due to legislation, but due to a swift and merciless reaction from the market. Andersen lost their credibility and were subsequently wiped out. I would think that what is now The Big Four have taken that lesson to heart.
    A voluntary code as opposed to legislation has the advantage that it is much more flexible and more adaptable to a dynamic world.



  • Every solution creates new problems. We all are familiar with the high costs associated with SOX but the act has created a new problem where a public firm elects to delist, thereby freeing itself of the costs and also from SEC oversight. One publically traded firm, Rexhall Industries, voluntarily delisted and it since has shamefully ignored the interests of its stranded outside shareholders. Since Bill Rex unilaterally unlisted, the price of the stock has plummented from about USD3.00 to less than a quarter.
    Can anyone suggest where I can go to find a list of delisted companies so that I might study how these firms have engaged in inverstor relations in the post delisting era?
    Thank you.



  • Here it is a sec page with all the delisting registered.
    sec.gov/rules/delist.shtml
    good luck.



  • Thanks for the list site but for some reason Rexhall Industries is not on the list. Could it be that since Bill Rex ‘voluntarily’ delisted, this firm is not listed?


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