Big brother 1765

  • Good evening,
    I am Finance and SOX Manager in a subsidiary (located in northern europe) of an american company. My opinion : SOX is a big brother machine, in the hands of 3 or 4 companies (EY, Deloitte, PWC…) themself in the hands of few peoples.
    When we analyze all the key controls requested by SOX, this is a flash back to 19 th century in term of efficiency of the organizations.
    A lot of documents to generate, a lot of peoples for a poor validation, and finally, no real control. Human error is always possible. Cost of SOX is very high, we will need more peoples for an heavy organization.The principle of SOX is : we are not professionals, we are all bad peoples and every day, we must demonstrate we are good guys and we know our job.
    When we see the former communist system, SOX is not far…one person = another person to control this person.

  • Welcome Peter,
    In a free market, investor confidence is absolutely important. Sarbanes Oxley is only one step towards this direction.
    I have to remind you that there were serious corporate scandals on both sides of the Atlantic.
    The US responded to Enron and WorldCom by building on the 1930s Securities Acts, with the enactment of the Sarbanes-Oxley Act in 2002.
    After that, the NYSE and NASDAQ redrafted their Listing Rules. This was one more step to the power shift on boards of directors, away from the concentrated power of the chief executive. We have (more and above SOX) independence of non-executive directors and increased shareholder participation in governance matters, for example through the approval of equity compensation plans.
    Today, it is more difficult to comply with the NYSE and NASDAQ Listing Rules than with Sarbanes Oxley.
    In Europe in 2003, there were some similar scandals, like Ahold in the Netherlands and Parmalat in Italy, and the same results, damaged market confidence. The European Commission acted to restore market confidence.
    In the UK, after the Higgs and the Smith reports, the response was to strengthen the Combined Code on Corporate Governance by refining existing recommendations and introducing new ones in 2003.
    The Organisation for Economic Co-operation and Development (OECD) published the OECD Principles of Corporate Governance in 1999, subsequently revised in 2004.
    In Japan we have the J-SOX.
    Sarbanes Oxley is not the problem, but only one of the results of globalization. Investors want to understand and trust companies everywhere, and they want to be able to invest in a flat world.

  • Hi peter
    you were spot on, But as Lekatis told, SOX has helped in boosting investor confidence( and the purses of Big Four of course).
    It wouldnt be appropriate to blame the Big four, they are doing what a good business organization does. If there is no available business, they go out and Create the Business… :lol:
    Only few organizations are really smart enough to combine all the compliance requirements and answer them jointly. What ever be the drain on resources, one such act is required for keeping the Lays’ and skillings under check.

  • To be fair to the Big 4. Sox is also a drain on their resources. They need to ensure that proper training is provided every year and need to confirm this to the SEC. In addtion, SOX testing actually requires more senior staffingas junior staff will often get confused between Financial Reporting audits and Controls audits. They often tend to draw the wrong conclusions from their work.
    Having to spend so much time performing multiple testing as a senior auditor and/or manager is often seen on a drain to their own resources. It is often difficult to get seniors to attend the courses as they will be already busy on other client work, but without the course, they they are not compliant with SEC requirements to allow for the SOX audit to be performed. -Hence, resourcing in SOX is a major issue for these firms, and is probably a contributing factor to the high fees.

  • Hello
    I agree with EMM and Lekatis. Perceptions of the audit committee considering Big 4 as control professionals and thereby their Saviour on SOX compliance has led to SOX compliance being a miliking cow for the big 4. I agree with Peter and EMM that this has led to a bandwagon scenario for the big 4 to procure inexperienced and mediocre staff to meet SOX demands.
    SOX was a welcome change as a shift towards back to control based audit that was abandoned due 14 years back due to BCCI, Many Hani and Chemical Bank crisis. Back then, we have used the similar risk assessment methodology (RACM) to conduct independent audits that was abandoned all these years and reestablished by Big 4 after their adoption of balance sheet audits led to scandals like Parmalat, Enron, Adephia, Tyco and Worldcom.
    And SOX should not be a considered a domain for Big 4. There are many control professionals like me and Milan, who are helping SOX compliance for our respective corporations without outsourcing these functions to Big 4.

  • _at_PeterH
    SOX didn’t bring anything new for us. As you might see, I’m also working in Northern Europe, and there wasn’t much we ‘suddenly had to do’ that we didn’t in one way or another do before SOX.
    And what we did change only improved our organisation. Give it some time, you’ll see the benefits.

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