December 1, 2004
Sarbanes-Oxley, the law which unanimously passed the Senate in 2002, places substantial costs and burdens on public companies while accountants profit, says Wall Street Journal business columnist Holman W. Jenkins Jr.
Sarbanes-Oxley was designed to reduce investor risk by getting tough on CEOs and public companies for alleged accounting irregularities. However, no law, says Jenkins, can shield those who take the risk of investing in speculative ventures. Furthermore, it does not address the well-publicized behavior of CEOs.
According to Jenkins:
- Sarbanes Oxley (i.e. "sarbox"), will cost Fortune 1000 companies an estimated $6 billion this year alone.
- Small start-up companies that wish to go public will have to cough up an estimated $150,000 just for Sarbox paperwork.
- Audit fees for the average company have risen by 50 percent over just one year.
- Companies must spend about at least $100,000 insuring their board members.
- Late filers of financial reports to the Securities and Exchange Commission doubled last quarter, topping about 600.
Furthermore, the benefits are accruing not to the investor class, but to the "Big Four" accounting firms -- KPMG, PriceWaterhouseCoopers, Ernst & Young and Deloitte & Touche. Besides the fact that Sarbox gives them extensive power over corporations, they are expecting substantial profits as well by year's end.
Source: Holman W. Jenkins Jr. "Thinking Outside the Sarbox," Wall Street Journal, November 24, 2004.
For text (subscription required): http://online.wsj.com/article/0,,SB110126342118582687-search,00.html
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