In ancient times, religious scholars would - I’ll assume for lack of modern-day game shows or online brain-power quizzes - mull such quaint esoterica as how many angels could fit on the head of a pin.

When I once asked my father how it was possible for purportedly human-sized beings, outfitted with bulky, feathered wings to boot, to balance themselves on something as imperceptible as the head of a pin, I was met with a curt, “Because they’re angels.” It was clear that that was as much of an answer as I was likely to get.

Fast forward a few thousand years, as modern-day comtemplatives, connected in some way, shape or form to the accounting profession, attempt to assess the effects of the passage of the Sarbanes-Oxley Act of 2002.

Depending on whom you poll, the sweeping reform act, enacted a year ago on July 30, 2002 - which basically has changed the way public auditors and capital markets operate - has either been the best thing to hit the accounting landscape since the adding machine replaced the abacus, or an Orwellian mandate that has tightened the government’s grasp on the profession like a rusty industrial vise.

The legislation was drafted to address what were systemic weaknesses in the profession and in the capital markets overall. While the profession kept reiterating its shopworn mantra about a successful century of self-regulation, accounting scandals at such companies as Waste Management, MicroStrategy and Cendant began to accumulate at an alarming rate.

Sadly, the profession might have avoided the degree of government oversight that it has squarely in its lap at the moment, had it not battled so vehemently three years ago in a skirmish over audit independence rules proposed by former Securities and Exchange Commission chair Arthur Levitt. The powerful synergy of the accounting lobby and several of the larger firms was so imposing that Levitt was actually threatened with a funding cut for his agency if the rules, as originally written, were pressed into action.

The independence guidelines that eventually morphed out of that protracted fight were so watered down that they resembled broth attempting to pass as vichyssoise. One of the great ironies of Sarbanes-Oxley is that certain lawmakers who openly teamed with the accounting lobby to deflate Levitt now masquerade as “reformers.”

Then came the accounting debacles formerly known as Enron and WorldCom.

Under Sarbanes-Oxley, we have nine services currently prohibited under the act, not to mention an array of new rules about the makeup of audit committees and financial reporting guidelines.

The act also gave us the Public Company Accounting Oversight Board, a non-profit entity that has been granted the regulatory power that the now-defunct Public Oversight Board should have had, but never did. The board has also basically usurped the standard-setting authority of the American Institute of CPAs.

To be fair, one of the primary concerns about Sarbanes-Oxley - and rightfully so - is the potential of the act trickling down to non-public issuers and the smaller firms. As in every work in progress, however, that chapter is still being drafted.

But no matter what your stance on Sarbanes-Oxley, one thing is inarguable: It’s here to stay - no matter how many auditors can fit on the head of a pin.

Bill Carlino

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