PHASE II -- QUESTION 9
Do you think the Sarbanes-Oxley Act of 2002 will effectively enhance the accuracy, reliability, and integrity of the financial statements of public companies?
posted by Dr. Scott @ 9/20/2005 02:37:00 AM
47 comments
47 Comments:
According to PriceWaterhouseCoopers, (http://www.pwcglobal.com/Extweb/NewCoAtWork.nsf/docid/D0D7F79003C6D64485256CF30074D66C) "the Sarbanes-Oxley Act is the single most important piece of legislation affecting corporate governance, financial disclosure and the practice of public accounting since the US securities laws of the early 1930s." The Sarbanes-Oxley Act is a monumental step for today's corporations and for security in shareholders' investments. It sets standards for auditor reports, investigation And disciplinary proceedings, penalties for improper conduct, and forces disclosure for the benefit of the investors, economy, and workers as a whole.
Personally I believe the SOX will effectively enhance the accuracy, reliability and integrity of the financial statements of public companies, in that the SOX, “was created to protect investors by improving the accuracy and reliability of corporate disclosures. The act covers issues such as establishing a public company accounting oversight board, auditor independence, corporate responsibility and enhanced financial disclosure.” (http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act ) These steps and rules set forth by the government allow for very little if any fraudulent actions and deceptions on any auditor reports or financial statements. Thus the accuracy, reliability and integrity of the financial statements for these public companies are definitely enhanced.
I definitely think that the Sarbanes-Oxley Act of 2002 is a major step foward in enhancing accuracy, reliability and integrity of statements of public companies. However, I also don't know if it will actually put an end to fruadulent activity in business. Fraud is not done by accident. I don't even think it has to do with greed. According to Martin Samociuk, a director of Hibis Consulting and author of many books on fraud and psychology, fraud won't be eliminated by the Sarbanes-Oxley Act of 2002 because people engaging in fraud don't think that they'll get caught. That's the main problem at hand. So even though the Sarbanes-Oxley Act of 2002 has set up all these rules and regulations, for the people who commit fraud, in their minds it doesn't pertain to them. Martin Samociuk describes states that the only way to prevent fraud in financial statements and companies is to look at risks being taken from the person's view who is committing the fraud and using a detection method to steer potential fraudsters away from doing so.
http://www.riskmanagementmagazine.com.au/articles/12/0C02F812.asp?Type=125&Category=1239
I am in agreement with Chase Miller in that I belive the Sarbanes Oxley Act will not be able to stop fraud. In June of this year, the first CEO to be punish under section 404 of the Act was Richard Scrushy the CEO of HealthSouth. However, he was acquitted on all charges. This shows the ineffectiveness of the law beause of the agencies in charge of the prosection, the Securities Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) were not able to punish those who commit fraud.
Refrence: http://thehill.com/thehill/export/TheHill/News/TheExecutive/063005.html
I agree with the majority of what everyone else has blogged, the SOX Act of 2002 will enhance the accuracy and reliability and the integrity of the financial statements of public companies - upon reading http://www.economist.com/business/displayStory.cfm?story_id=3984019, it states that there will be fewer frauds in the future, however it will not completely eliminate the chance of fraud. In addition, the SOX Act has recently discovered that there are hidden costs that had not been calculated, and thus might pose a problem in the future.
There is controversy about the expected costs to fully implement the Sarbanes-Oxley Act. Many accounting and other professionals, news media, business magazines and journals have expressed various perspectives. Anna mention something about hidden costs. What are the various costs and who bears the costs? Which of these costs are hidden? How? Will the expected costs hamper the effectiveness of SOX?
One hidden expense in the SOX Act is the turnover and compliance training. Companies have reportedly "spent millions on compliance training for financial and operations-line employees who are now responsible for and diretly affected by the morale=deflationg requirements of SOX. According to a study by Financial Executives International, a company with revenue between $1 billion and $4.9 billion spent more than $750,000 on internal compliacen expenses of which training was one of the major costs."
The company and its employees are burdened because of the low morale that is associated with the turnover rate and the costs associated with SOX.
information pulled from:
http://64.233.161.104/search?q=cache:hXeUvpfhxwAJ:www.accountingsoftware411.com/AcctSoftware.nsf/00/pr22CBFB4D056950628625705A001EFFE3%3FOpenDocument%26Click%3D+hidden+costs+in+SOX+Act&hl=en
Another hidden cost includes how, “low employee morale threatens the business benefits achieved in the first year of SOX.” According to Patrick Taylor, CEO of Oversight Systems, “The tangible costs have been extremely high; compliance burdens employees with extra work, which they too often view as redundant, unnecessary, and a distraction from their actual work and goal of creating value.”
If companies can not convey to their employees that there are benefits associated with SOX then they will not perform well in this first year. Taylor suggests, “To raise employee morale, executives should link SOX compliance to tangible business benefits and goals. In this way, executives should position their compliance efforts similarly to other corporate initiatives, such as Six Sigma or total quality management.”
information pulled from:
http://64.233.161.104/search?q=cache:hXeUvpfhxwAJ:www.accountingsoftware411.com/AcctSoftware.nsf/00/pr22CBFB4D056950628625705A001EFFE3%3FOpenDocument%26Click%3D+hidden+costs+in+SOX+Act&hl=en
A third cost due to the compliance of the Sarbanes-Oxley Act is that, “Some non-American companies have threatened not to list in New York because of the cost of the legislation; others that have recently delisted from an American stock exchange are said to have done so partly because of Sarbanes-Oxley; and some 20% of public companies in a study by Foley & Lardner, a law firm, said that they were considering going private to avoid the costs of the act.”
It seems that many companies are seeking, “relatively unregulated forms or jurisdictions,” in order to bypass the rules set out by SOX.
http://www.economist.com/business/displayStory.cfm?story_id=3984019
There are reports out that suggest that investors may not believe that SOX has or will enhance reliabilty and integrity of financial statements. (See "How Markets Punish Material Weaknesses", CFO.com, July 21, 2005, http://www.cfo.com/article.cfm/4197475.
The major investors in stock are institutional investors like insurance companies, mutual funds, etc. What do you think they say about SOX's impact on financial information issued by public companies?
Although the Sarbanes-Oxley Act has helped to reduce fraudulent accounting, it does not solve as many problems leading to fraud as it should. It is successful in recognizing "conflicts of interest" by putting limits on auditing firms and how many services they can provide in a company. However, it fails to "make gatekeepers who knowingly aided and abetted a securities fraud liable to investors in private litigation" (Cornell Law Review. In addition, it doesn't put enough restrictions on stock options, which have obviously given CEO's huge motivation to overstate their corporation's incomes to make more of a profit for themselves personally. The Act forces the profits made to be given to the corporation, should they later restate their earnings, however this isn't enough. The Sarbanes-Oxley Act is very helpful, however doesn't cover all of the aspects of fradulency that it should to more effectively solve the problem.
The major working investors, as mentioned, as “owning at least $5,000 in stocks, bonds and mutual funds, only seven percent of these major investors indicated that Sarbanes-Oxley had increased their confidence as an investor. Likewise among this group, only seven percent said it had increased their confidence in the leadership of public companies.” Thus, these major investors have little assurance that SOX will indeed enhance reliability and integrity of financial statements. http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/11-22-2004/0002495829&EDATE= companies
"As its baseline, the SEC study began with the number of audit-related suits filed against the then Big Six accounting firms from 1990 to 1992. For those three years, the relevant numbers were 192,172,141 respectively. In 1996, however, the first year following the passage of the PASLRA, the SEC found that, out of the 105 securities class actions filed in that year, accounting firms were named in only six cases"(Coffee, pg. 289).
According to this information, the trend of suits related to accounting firms will keep decreasing until there are no more suits filed. The number of suits filed today must be very low because in 1996, there were 105. From this information, I can conclude that the Sarbanes-Oxley Act of 2002 will improve accuracy, reliability and integrity in accounting firms and corporations.
While I agree that the Sarbanes-Oxley Act is a stricter and better act in order to prevent fraud and increase investor comfortability in companies, both the explicit and implict costs of such and act may be counter productive. For example, the cost to comly to Section 404 U.S. business more than $30 billion. This section also cost smaller busines a proportionatly larger amount to comply.
Informaton from: http://www.businessweek.com/bwdaily/dnflash/aug2005/nf2005081_7739_db016.htm?campaign_id=topStories_ssi_5
I believe that the SOX act has not effectively enhance the integrity and reliability of financial statements of public companies. As Coffee says, "Gatekeepers have failed shareholders", and if this is the deeper problem, then I presume that the SOX act has excluded gatekeepers from the list of issues they want to resolve. They have looked away from gatekeepers. They {those who made the SOX an act} are trying to avoid the problem, which will not solve the bigger problem of frauds.
information taken from the Cornell Review.
I believe that the Sarbanes-Oxley Act makes an effective attempt to enhance the accuracy, reliability, and integrity of the financial statements of public companies by implementing rules and regulations to prevent fraud, but at the same time, SOX also consumes a lot of time and exhuasts a large number of resources. Therefore, I agree with Sam Kupelnick that SOX is not completely effective. The laws that SOX outlines fall harder on smaller public companies because they do not have accounting and financial systems as intricate as those of larger corporations. “It may be that in the future only companies worth $100 million or more may be able to afford being publicly traded, and thus fall under SOX regulations.” It is evident that, although the Act was created to prevent illegal activity within businesses, many of the regulations relate more to larger companies while inconveniencing much of the smaller companies to which some of the rules cannot apply.
http://www.eweek.com/article2/0,1895,1863711,00.asp
In agreement with a majority of the responses, I agree that the Sarbanes-Oxley Act of 2002 will effectively enhance the accuracy, reliability, and integrity of the financial statements of public companies. I also believe that this act helps to open the eyes of corporations and auditors to show them how serious fraud and other violations are to their company and employees. As explained in SEC 101, the Board of Commission must "(4) conduct investigations and disciplinary proceedings concerning and impose appropriate sanctions where justified upon, registered public accounting firms and associated persons of such firms, in accordance with section 105"(116 STAT. 750). This section explains how the board of commissions must take their job to the next level in order to oversee the audit of public companies. Compiled with over 70 sections, this legal document clearly states the consequences of fraud and other serious crimes. This goes without saying that financial statements are more carefully recorded and reviewed by accountants, as it places a huge emphasis on corporate executives, financial officers and professional service providers. Firms are less likely to try and get away with crimes, especially after the scandal with Enron and Waste Management; therefore, auditors relay accurate and reliable information in examining financial statements. Accuracy, reliability, and integrity play a huge role in giving the investors confidence in a corporation, if these three aspects are not used in full force there will be many consequences as stated in "Title VIII-Corporate and Criminal Fraud Accountability." Under section 8, it explains that "destruction, alteration, or falsification of records...shall be fined under this title, imprisoned not more than 20 years, or both" (116 STAT. 800).
I believe it to be a bold attempt by lawmakers to put lid on the financial scandals of the past years. I wonder why is that they come up with an act of congress after the fact, how is it that no one saw this coming? Now we have SOX, it is supposed to restore investor confidence by requiring more audits and reports and by making the officers of the company more liable for the company's actions. My grandmother used to say, "Hecha la ley, hecha la trampa" which roughly translates to, for every law there is a loophole. We should take action to prevent anything like this from happening again and also be in the lookout for ways of commiting fraud that are not addressed in SOX.
This comment has been removed by a blog administrator.
In response to Dr. Little, the CFO website offers much information on how investors believe that SOX will not effectively enhance the reliability and integrity of financial statements of public companies. As explained in the article "Are the benefits of Sarbanes-Oxley worth the cost?" by Tim Reason, one retailer of Urban Outfitters describes his dissatisfaction with SOX. He implicates that he spends his days "documenting countless procedures and processes, which to most employees of this company are second nature." This is primarily due to section 404 "Management Assessment of Internal Controls", in which companies must document their roles by stating their duties of management for maintaining an adequate internal control structure and give forth and assesment at the end of each year. This has made managers jobs a struggle and added to their responsibilties tremendously.
Explained in another article composed by the CFO board, they discuss how investors are skeptical of SOX, and there concerns as to if it helps to enhance the integrity of public companies. The board believes that due to an lack of relaxation in section 404 requirements will slow the rate of economic growth by nearly 0.5 percent and reduce employment by over 300,000 jobs (www.cfo.executiveboard.com). According to their findings with SOX, they found that this act only succeeded in the short term and added a huge disruption to the auditors. There is also little evidence that SOX has reduced doubtful behavior or fraud corresponding with executives. As a result of this lack of confidence that still remains with investors, there is a negative change in the balance of business. Although SOX is supposed to improve procedures for creating and reviewing financial reports, consequently it will increase a variety of business risks and costs. After reviewing articles regarding concern for SOX, it is inevitable that many investors still have a lack of confidence and intergrity towards public companies.
In response to Dr. Little’s question about what major investors in stock say about SOX’s impact on financial information issued by public companies, I think that they are probably not going to be convinced that reliability and integrity of financial statements will change for the better. People will still find little ways to get around providing an accurate financial statement if they want to. Sure the SOX has helped to clear up some of the inaccuracies of firms’ accounting methods, but like I said in an earlier comment, the SOX act will not stop people from committing fraud because most that commit it do not think that they will get caught, so they don’t see how the rules pertain to them. Also, according to the article that Dr. Little sites in his/her comment, control deficiencies and other problems in companies must be reported in their annual report. This often causes insurance companies, mutual funds, etc to react quickly and sell their stock in a firm when control deficiencies, tax accounting, documentation, etc are reported with errors or problems. So these investors would probably argue that the SOX has not impacted financial information issued by public companies.
Sources for my previous comment:
http://www.cfo.com/article.cfm/4197475
http://www.riskmanagementmagazine.com.au/articles/12/0C02F812.asp?Type=125&Category=1239
The SOX act of 2002 is, and will continue to, enhance the accuracy and reliability of financial statements of public companies. The main point, as declared on the SEC's webpage, of the Sarbanes-Oxley Act is to "enhance the integrity of the audit process and the reliability of audit reports on issuers' financial statements". All of the various organizations and committees set up by the SOX act work together to provide investors with a more reliable, consistent form of financial reporting. Section 308(a) of the act, the "Fair Funds" provision, has provided the SEC the authority "to use civil penalties to help make defrauded investors whole". An important example, pointed out on the SEC's website, involves those defrauded by the Worldcom, Inc. scandal. The company has agreed to pay $500 million in cash and $250 million in stock to defrauded individuals. This is just one of many examples of SOX in action, working for their intended purpose of protecting investors.
http://www.sec.gov/news/testimony/090903tswhd.htm
"Expert"
Do you think publically held companies should be required to have at least one full time ethics/compliance officer whose main responsibility would be to train & promote ethical behavior for everyone employed by their business? How would this deter fraud under the guidleines and rules of the SOX Act?
In response to Expert S Goodwin, I feel that publically held companies should be required to have at least one full time ethics/compliance officer whose main responsibility would be to train & promote ethical behavior for everyone employed by their business because the consequences of doing something wrong comes out with someone wanting to sue the corporation or sue someone just because the facts may not have been clearly stated. Now with an ethics officer training employees in making right decisions would help benefit the corporation because they won't get caught up in lawsuits or any other financial or crucial liabilty. Also, with this ethics officer, he can help motivate the employees and maintain a positive working environment allowing both employees and employers to be happy at the end of the day.
Consider this however, will having an ethics officer really make a difference in the company's output? Do people change their behaviors and beliefs that easily?
In response to Cynthia's question: Do you think that people will change their beliefs and behaviors with an ethics officer in place, I believe that it depends on the level of involvement of the ethics officer. If he/she is just there to train employees and managers to maintain a "fraud-free" work environment then I don't believe that people will change. However if this ethics officer not only trains, but enforces his/her teachings then employees and managers will most definetely abide to he/she's rules. If there is no consequence involved with doing something bad, then people will still do it even if they are taught not to.
I am having hard time believing that fact that this law will help stop unethical practices. I believe when someone is unethical, they are in a mindset to do what they are doing. I think that the people that have gotten away with this in the past will continue to do so for the sole purpose of greater profits and money. The information on Sales Masters World (http://www.sales-masters-world.com/article.php?id=Sarbanes-Oxley-Act-Compliance&source=Overture-231) agrees with what iam saying. They state, "the bad news is that the ongoing burden of 404 compliance will continue. Some companies (maybe 10-20%) will have either “material weakness” or a “significant deficiency” noted by their auditor." This unethical businessmen even more desperate to get thier money in some way.
I'm not sure if it's necessary for corporations to have an ethics officer, but rather an ethics code in which all employees agree to maintain. I feel that if corporations include an ethics statement with strict repercussions in each employees' contract, then the employee knows right away the ethical standards the corporation expects them to live by. The extent of the consequences for breaking the ethics standards should be something addressed by either the board of directors and/or the top level management. It should be given as an individual incentive to do well, and know that fellow employees are behaving in the same ethical practices as yourself.
I think an ethics officer wouldn't be cost-affective, and might even be counter-productive. The people working in the company already have to worry about doing their jobs right, having numerous bosses and many great responsibilities. If you add an ethics officer into the mix, it would just be another person in a position of power to look up to. I doubt that a worker would be happy with it, and I don't see how their productivity would increase.
A good quote that I found about ethics officers was said by Frank Daly, who is an ethics officer, is "We aren't in the business of teaching people how to be ethical. "We're teaching ethical people how to make a good decision when it could be difficult." I think this kinda sums up all the discussion on whether ethics officers really work. It all depends on the people that are being taught the ethics. If they are ethical people to begin with then it will be successfull, however if they are not then it will turn out unsuccessful. A good article to read about this issue can be found at...http://www.jonentine.com/
ethical_edge/Ethics_Officer.htm
In agreement with Kristin's comment, on October 5, I do not believe a company should have an ethical officer, or group of officials. The responsibility of ethical conduct lies on the shoulders of the company as a whole. Expert Goodwin had suggested that a company should maybe have someone train the workers in the area ethics. These ethical officers already exist through the project trainers, and as the officials hiring new employees. These "hiring" officials know that you cannot train ethics; it is an innate character trait that the candidate has or does not have.
As far as workers in higher positions, if they do not carry out proper ethical conduct, and the Sarbanes-Oxley Act is not enough to keep them from doing so, would an ethics training group really stop them? I do not believe so.
We need more preventive programs in place. We wait until it is too late to do anything, it was after the Great Depression that the SEC was formed, now it is the financial scandals of the late 90’s early 00’s so they came up with SOX. What about those problems that await for us in the future? We have to be four steps ahead of the people that are committing fraud, we have to work harder to close loopholes and make it harder for people to get away with fraud. A way to accomplish this is by requiring individuals to disclose their offshore accounts. It was in this way that a lot of the money that was drained from these companies made it out of the country. We have to urge Congress to pass legislations that make it illegal for these kinds of activities to go on.
Instead of hiring an ethics officer, I have an idea that might help all involved. Instead of each company hiring their own ethics officer to train and promote ethical behavior in financial reporting, their should be someone in the company who deals with the ethics however this person should be more of a supervisor in order to provide structure and keep the company’s reports ethical. Because like Brian Blush said, when people are unethical, an ethics officer will not change that. But if however that ethics officer was to supervise and review the employee's work, then maybe the worker would think twice about lying on the reports.
I believe that having having an ethic's officer in a corporation will absolutely help to reduce fraud, but by no means eliminate it. It is not likely that an ethics officer would be able to change the ethics and morals of already corrupt employees who commit fraud to profit themselves. It will, however, allow each member of the company to recognize that their particular company takes ethics very seriously. For example, if an employee suspected that a coworker, or a CEO was practicing dishonest accounting, they would most likely be hesitant to stand up to this person, but an ethics officer would make it much more easy for them to tell someone and handle the problem. It is important, however, that a company not only hires an ethics officer to make themselves seem more trustworthy, but that the company as a whole supports the decision and actually makes it effective.
Like many others, I believe that the Sarbanes-Oxley Act of 2002 will effectively enhance the accuracy, reliability and integrity of the financial statements of public companies and here is why: 1. There is less oversight by management. Now instead of auditors reporting to management, they report to and are overseen by a company’s audit committee. 2. The Audit Partner Rotation. The lead audit partner and audit review partner must be rotated every 5 years on public company engagements. I believe this will make auditors less concerned with job security and therefore less prone to engage in fraud. And 3. Criminal Penalties and Protection for Whistleblowers. The law creates tough penalties for those who destroy records, commit securities fraud and fail to report fraud. Though the preceding were only 3 parts to the Sarbanes-Oxley Act of 2002 I believe this alone would make a great impact on the integrity of financial statements.
http://www.aicpa.org/info/Sarbaones-Oxley2002.asp.
In addition to Cynthia Lee's question, another question arises. For the slight chance your company does cheat the statements and commits some kind of fraud and also for the slight chance they get caught doing this act, is it worth paying an ethics officer and continually paying him as long as he/she is on staff?
In response to the "ethics officer" question, I am in agreement with Huxta and Vanaman's comments on Oct. 5/6, however there are additional arguments that can be made pertaining to this subject. Directly stated, ethics is defined as "standards of conduct and moral judgement," which as Vanaman said, an individual either has or does not have depending on a number of factors including upbringing, education, experience, etc. More importantly, SOX item 406a of regulation S-K requires organizations to disclose three things. They include (1)whether they have a written code of ethics that applies to their principal executive officer, principal financial officer, and principal accounting officer, (2)any wavers of the code of ethics for these individuals, and(3)any changes to the code of ethics. Furthermore, if a company does not have a code of ethics, they must explain why they do not have one, which indirectly puts them under more scrutiny in the future. That being said, it seems unnecessary for an individual to recieve a salary for doing what a simple contract could achieve with a few small strokes of a pen.
http://www.thelenreid.com/articles/article/Corporate_Ethics.pdf
To further comment on my previous posting, Item 406 defines a code of ethics as written standards that are resonably designed to deter wrongdoing and to promote a variety of elements. They include"(1)honest and ethical conduct, (2)full, fair, accurate, timely and understandable disclosure in reports and documents that a company files with/or submits to the Comission, (3)compliance with governmental laws, rules and regulations, and (4)accountability for adherence to the code." Each of these elements effectively promotes fairness, integrity, and loyalty of those involved with reporting financial statements, with the exception of those who are inevitably set on unethically falsifying the facts in efforts to better themselves.
http://www.thelenreid.com/articles/article/Corporate_Ethics.pdf
I agree with Michael Parker when he writes on October 6th, "...when people are unethical, an ethics officer will not change that...supervise and review the employee's work, then maybe the worker would think twice about lying on reports."
Unfortunately, there are some people who do not care whether or not their conduct is moral. Threfore, accountants and auditors must be watched and know that the penalties for unethical reporting are stiff.
I would strongly encourage public accounting firms to have their own codes of conduct (as Kristin Huxta suggested) and people to enforce those rules (as Michael Parker suggested).
The Sarbanes Oxley Act has built into it what I think is a fairly good system for accountability. All public accounting firms must register with the Pulic Company Accounting Oversight Board (PCAOB).
The seven year retention requirement mandates that all auditng related information be kept on file for seven years. The PCAOB makes annual inspections of all large auditng firms. If the board suspects fowl play, they have an investigation.
If a firm or employee is found in violation, the penalties can be severe. A firm or idividual may be allowed to perform only restricted activiies. A firm's registration with the PCAOB can be suspended or lost altogether. An individual can be forbidden to work with a public accounting firm ever again. Fines can be as much as $2 million per violation for firms and $100 thousand per violation for individuals.
infomation pulled from the website for the New York State Society of CPAs
http://www.nysscpa.org/oxleyact2002.htm
Micheal Parker makes a great point. I dont beleive that an ethics officer will completely remove all unethical practices. i believe that the only way to have unethical ways reduced is to have someone check thier work to make sure it is correct. But this is really no different then say the manager of the project. Arent they supposed to check the work and make sure that this is correct. I believe that his ethics officer is doing nothing different then say a manager or team leader. The managers job is to make sure that everything is running the right way, therefore this person is just another employee on the payroll. Even if thier was an "ethical officer," who says they will always do the right thing if a lot of money comes thier way. Who is going to watch over the ethical officer? This is why i dont beleive that the SOX will greatly remove unethical practices
In every aspect I see the Sarbanes-Oxley Act of 2002 to be logical and beneficial in it’s quest to effectively enhance financial statements. I find only one exception to my claim and that is the part of the SOA that creates tough penalties for those who fail to report fraud. There are many instances where one or more people get caught in the wrong place at the wrong time and find out secret information. Though one might have nothing to do with the fraudulent acts, by just knowing and keeping quiet about it, it’s just as incriminating? That’s ridiculous. That’s a tough spot to be in when you need to keep your job and family in mind. From the crib most of us were raised to look down on “tattle tails” giving a tattle tail the same punishment as the wrong doer. The SOA reverses this age old way of thing and could force good people into horrible positions.
In response to Steve's last comment, about "tattletale's", SOX actually has a confidentiality agreement with those who report frauds, so that they don't get harassed or accused of causing someone to lose their job because they opened their mouths. Even though Steve says that good people are being forced into horrible situations, you can also look at it as good people making right decisions in telling the truth and speaking up. For example in court cases, you are giving that chance to speak up and get a lesser degree of charge than someone who did all the crime, even though you were an accomplice and that is what someone 'tattletaling' is also doing.
It has had a very big impact. Since the institution of the Sarbanes Oxley act the Big Four have dropped various public clients that the deem to be too risky. More particularly, the larger publicy traded firms. The larger the size, the harder it is to control, corruption can hide more easily. While in general this is a good thing, it is makeing auditors more uptight about who they give services to. This makes the smaller more private firms to have a harder time seeking out an accountant from the Big Four, but overall, the benefits of truthful financial statements lead to safer and more confident investing; it is well worth the risk.
Material From (sorry about the long Hyper link :-/) :
http://find.galegroup.com/itx/retrieve.do?subjectParam=Locale%252528en%25252CUS%25252C%252529%25253AFQE%25253D%252528SU%25252C15%252529Sarbanes-Oxley%252B%252524%257E%2529_1&sort=DateDescend&tabID=T002&sgCurrentPosition=0&subjectAction=VIEW_TOPIC_TREE&searchId=R5&prodId=EAIM¤tPosition=37&userGroupName=udel_main&resultListType=RESULT_LIST&sgHitCountType=None&qrySerId=Locale%28en%2CUS%2C%29%3AFQE%3D%28SU%2C28%29%22Sarbanes-Oxley+Act+of+2002%22%24&inPS=true&searchType=BasicSearchForm&displaySubject=&docId=A135465794&docType=IAC
I really like Michael Parker's idea, Oct. 5th. The ethics officer for some of the larger companies should be considered more allong the lines of a consultant (someone that is from an independant company aside from the accounting firms and the company they would be apraising). This would solve a lot of the fear that I talked about in my first post. And in turn, the smaller firms looking for accountants will get business. While it is all still based on trust, its a start.
I disagree with Steve Schirripa's comment on 10/7 where he calls employees who report financial fraud "tattle tales"
The Oxford Dictionary defines the word "tattle" as, "1. prattle, chatter gossip idly, speak indiscreetly. 2. utter (words) idly, reveal (secrets)." and defines "gossip" as "idle or trivial talk"
Oxford English Reference Dictionary, 2nd ed., edited by Judy Pearsall and Bill Trimble, 1996, p. 1477
To call reporting fraud "tattletaling" is to imlpy that financial fraud is a trivial and unimportant matter--that people who inform the authorities when workers lie on financial reports are just being nuisances.
Investors, creditors and managers depend upon the information in financial reports. If they are not accurate, investors can lose millions of dollars. So can creditors. Also, if managers or the board of directors truly don't know the reports are false, they might make poor business decisions and hurt the company. A failing corporation causes financial hardship for its investors (whose stock decreases in value), creditors (who may not receive payment on the loans they issued) and employees (who may have to take pay cuts or be laid off).
Financial fraud is a big problem with far-reaching implications. I think that to call reporting it tattletaling is a misnomer.
Whether or not ethics officers sre effective, it seems that corporations are using them and value them highly.
In 2005, Salary.com and the Ethics Officer Association conducted a survey about how much people in "Ethics and Compliance Officer" positions are paid. The survey was titled, "2005 EOA Survey of Ethics and Compliance"
"...the results of the survey shoe the increase in value that ehtics officer and compliance jobs have in today's highly scrutinized business world...Results show total compensationfor Top Global Ethics and Compliance Executives appraoching $75,000."
http://www.salary.com/aboutcompany/layoutscripts/abcl_display.asp?tab=abc&cat=Cat27user=Ser341&part=Par562
Post a Comment
<< Home