One positive result of the Sarbanes-Oxley legislation is the additional work that it generated for accounting firms. It is not only with regard to reviews of a company's internal controls, but also non-audit services that a public company's auditor is prohibited from performing, as well as tax planning and tax preparation engagements for those companies and their key officers.
This work is welcome and lucrative. And to think in part this work is attributable to legislative reaction to the Enron and WorldCom accounting scandals and the demise of Andersen. So maybe despite the millions lost, some good is coming out of a very dark time for the accounting profession when its "most trusted" reputation came under attack.
I am now seeing more work for accounting firms as a result of another accounting scandal, the promotion of tax shelters by national accounting firms, in particular KPMG.
The problem is accounting firms are doing a lot more work, but they are not getting paid for it. For example, e-mails now contain tax advice warnings required by Circular 230, and, of course, there are federal disclosure and reporting requirements with regard to tax shelters. Well, it's not going to stop there, as states have gotten into the act. For instance, New York, California, and Illinois require taxpayers and advisers involved with tax shelters to disclose certain transactions suspected to be tax shelters.
There are also other legislation and regulatory requirements imposed on accountants, and they include firm privacy disclosure notices to clients and notification of outsourcing by the firm. Of course, depending on where a firm is, the obligations might be different. For example, California's requirement on outsourcing is much stricter then those imposed by most other states, as well as the AICPA's pronouncement on outsourcing.
The interesting thing about all this additional work for accounting firms is that in one case the firms are shouting with glee about the new compliance requirements imposed on public companies, their potential clients. But on the other hand, these firms are loudly complaining about the additional new compliance obligations imposed on them.
I guess a work's attractiveness, like beauty, is in the eye of the beholder.
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