In life there are certain words and terms that are, shall we say, polarizing.
For example, “sushi” has a far more appetizing effect on me than several members of my immediate family, who have intimated they’d rather nibble on coal than raw fish.
For me, the polarizing trigger word or noun is “roller-coaster,” which evokes waves of nausea long before I strap myself in.
How about “Sarbanes-Oxley?”
Again, it depends on whom you ask.
SOX has, not surprisingly, been a flashpoint in the profession since its 2002 passage, from early fears of a trickle-down effect that has yet to materialize, to claims that it has actually harmed capital markets due to overzealous and redundant guidelines.
Meanwhile proponents claim it has helped improve investor confidence, deter fraud and hone audit quality.
A recent survey by the Center for Audit Quality would seem to concur that in the six years since SOX was signed into law, audit quality in the U.S has improved.
According to the survey, nearly 80 percent of more than 250 audit committee members in public companies who participated rated the current overall audit quality as either "very good" or "excellent." Meanwhile, some 82 percent said the level of quality has improved anywhere from “somewhat” to “significantly” over the past several years since SOX became law.
In the CAQ study, nearly 90 percent of those responding said the risk of inaccuracies in financial statements because of fraud is "not very high," while 60 percent concurred that fraud risks declined after Sox became law.
Moreover, a full 65 percent of the respondents agreed that investors should have more confidence in the markets as a result of SOX, while 58 percent said that changes resulting from SOX had a positive impact.
Now there are probably a number of reasons behind those responses and overall audit quality in general such as increased oversight, stricter internal controls and of course, more thorough audits that won’t hoist up a dreaded red flag during a PCAOB inspection.
But again all those can be lineally traced somehow to Sarbanes-Oxley.
True, the law is far from perfect and even the SEC seems determined to spare smaller public companies the time and money needed for compliance with several years of postponements, but those in the trenches feel it’s been a good thing.
Polarizing?
Maybe.
Unnecessary?
Hardly.
