SOX Center

Almost three-quarters of the chief financial officers in the US believe that Sarbanes-Oxley should be “repealed or reformed” as the costs of the 2002 compliance law have outweighed the benefits, according to a survey.

The findings underscore the scale of frustration over the costs associated with implementing “Sarbox”, even as regulators said that costs were expected to fall as new guidelines for the law were finalised.

In a survey of 484 chief financial officers by Duke University and CFO Magazine, almost 70 per cent said the costs of adhering to Sarbox requirements - principally its section 404 provisions on checking internal controls - “greatly outweigh its benefits”.

A total of 35 per cent said repeal or reform of the law was “badly needed”, although no distinction was made in the survey questions between repeal or reform.

Most business groups and US law makers believe the law does not need to be repealed, although a majority believe that reform of the way it is implemented is needed.

Such reform is already being carried out. The Securities and Exchange Commission has just provided executives with new guidance on Sarbox implementation.

The Australian: CFOs call for Sarbanes repeal

The financial reporting legislation may be changed in order to relax stringent regulations and reduce the cost of compliance

Regulators are preparing to review elements of the Sarbanes-Oxley Act to determine whether or not portions of the financial reporting legislation should be relaxed to ease the burden on companies doing business in the United States.

On May 24, the PCAOB (Public Company Accounting Oversight Board) — the nonprofit oversight group created to help manage application of the Sarbanes Oxley Act — plans to meet in Washington to vote on a range of topics, including several issues that could shift the application of the legislation, originally passed in 2002 to help fight corporate financial fraud.

In the meetings, the group is expected to approve a final standard for auditing internal control over financial reporting as well as a related independence rule and several other measures.

If adopted, the rule will supersede PCAOB’s existing Auditing Standard No. 2, also known as “An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements.”

The PCAOB also plans to vote on two separate recommendations to amend its rules on the frequency and level of scrutiny in required inspections to test compliance with SOX.

Info World: Regulators to begin SOX reviews

The Securities and Exchange Commission on Wednesday threw its weight behind finalising fresh guidelines aimed at clarifying how companies and auditors should comply with the Sarbanes-Oxley law.

The move signals that work by the US authorities to ease the burden of compliance with the 2002 law is moving into its final stage three months after proposed revisions were first floated.

At issue is how the SEC’s new guidelines for company management on implementing the law’s Section 404 internal controls provisions can be more closely aligned with separate guidance for auditors issued by the Public Company Accounting Oversight Board (PCAOB).

There is also disagreement over the extent to which external auditors should rely on a company’s own reviews of its controls.

This is testing US regulators’ willingness to adopt a more flexible, “principles-based” approach to corporate controls than those prescribed under Sarbox.

FT.com: SEC pushes clearer Sarbox guidelines

Republicans attempted to make compliance optional for companies with a market value of less than $700 million.

The U.S. Senate on Tuesday defeated a Republican attempt to weaken 2002’s post-Enron Sarbanes-Oxley laws by making it optional for many corporations to comply with a controversial section on internal controls. By a vote of 62-35, the Senate set aside an amendment to make compliance with Sarbanes-Oxley’s Section 404 optional for companies with total market value of less than $700 million.

The amendment was offered by South Carolina Republican Jim DeMint, who tried to attach it to a bill on the Senate floor that was focused chiefly on boosting investment in research, and improving science, engineering and math education.

In response to the amendment, defenders of Sarbanes-Oxley proposed and won passage, by a vote of 97-0, of a symbolic Senate statement expressing support for efforts already under way by federal regulators to fine-tune Section 404.

CNN Money: Senate rejects Sarbanes-Oxley change

Securities and Exchange Commission Chairman Christopher Cox isn’t ruling out further delays in applying stricter accounting requirements on small public companies but said such relief isn’t the option preferred by regulators.

About 6,000 smaller public companies have yet to come under two requirements adopted by Congress in 2002 as part of the Sarbanes-Oxley Act, calling for companies to make an annual assessment of their internal financial-reporting controls, with further review by the company’s outside auditor. Regulators have delayed applying that portion of the law to smaller companies amid complaints that compliance has been very costly and time-consuming for larger companies. In response to such complaints, the SEC and Public Company Accounting Oversight Board are working to make the requirement less burdensome for all companies.

SmartPros: SEC Chairman: Sarbanes-Oxley Relief for Small Firms Not First Choice

Lawmakers and regulators in Washington, D.C., yesterday heard an earful from small-business owners, including some from Massachusetts, who claimed the Sarbanes-Oxley Act is burdening firms and stifling growth.

Complaints ranged from the costs associated with the act’s accounting regulations to firms balking at going public if it means spending so much money complying with provisions.

“From my perspective as an entrepreneur, the atmosphere for raising capital in the U.S. has taken a turn for the worse,” said Joseph Piche, chief executive of Franklin-based Eikos Inc., a privately held nanotechnology firm. Piche, whose firm has explored going public, and others testified at a hearing of the U.S. Senate’s Small Business and Entrepreneurship Committee, headed by Sen. John Kerry (D-Mass.).

Thomas Venables, chief executive of Benjamin Franklin Bancorp in Franklin, said his bank achieved compliance last year with a key provision of the act, Section 404, which requires extensive accounting procedures.

Boston Herald: Small biz hits Sarbanes-Oxley law

A rising chorus of business groups is calling for dramatic accounting reforms

Corporations are suffering from a severe case of restatement fatigue. Last year 10% of public companies, some 1,244, had to correct their financials, up from less than 1% a decade ago. “Did all of these [companies] get it wrong because they were incompetent, lazy, or engaging in fraud?” says Robert C. Pozen, chairman of MFS Investment Management, a public mutual fund firm. “I don’t think [so].”

Of course, management is blaming the onerous rules of the 2002 Sarbanes-Oxley Act (SarbOx), which beefed up disclosure. But now companies also are blasting regulators. They contend officials at the Securities & Exchange Commission and others are capriciously reinterpreting rules or using ambiguous or inappropriate tests for problems–all of which has forced a flood of unnecessary and costly restatements. As a result, the movement to lighten the SarbOx burden has evolved into a broader push for dramatic accounting reforms.

BusinessWeekOnline: The Growing Revolt Against The SEC

The American Bankers Association has asked securities regulators to continue exempting smaller public companies from stricter accounting requirements adopted by Congress in 2002, deferring application for another two to three years.

In a letter Monday to Securities and Exchange Commission Chairman Christopher Cox, the banking trade group said it “strongly urges” smaller companies remain exempt from requirements to assess internal financial-reporting controls, have them reviewed by their outside auditor, and report major flaws to investors and regulators.

Senate Small Business Committee Chairman John Kerry, D-Mass.; House Small Business Committee Chairwoman Nydia Velasquez, D-N.Y.; and the senior Republicans on those panels, Sen. Olympia Snowe, R-Maine, and Rep. Steve Chabot, R-Ohio, are in strong support of such a delay, as is the Small Business Administration, according to the ABA.

Dow Jones Newswires: Bankers Assn Seeks Continued Small-Business Exemption

America’s Most Trustworthy Companies

Alexander the Great is reputed to have said, “Upon the conduct of each depends the fate of all.”

More than two millennia on, the words of the Macedonian king echo true in the boardrooms of America, where the tainted winds of option backdating, insider trading and questionable pension accounting blow fitfully–along with the occasional gust still from the Enron-era corporate scandals.

Trust in free-market capitalism requires that shareholders and other stakeholders in the system have confidence in the probity of companies. Hence accounting standards and governance rules, and the regulators’ requirement that they be transparent.

Forbes: The Good Bookkeepers

The Securities and Exchange Commission will make it easier for foreign companies to delist from U.S. stock exchanges and withdraw from SEC oversight, including the requirements of the Sarbanes-Oxley law.

A new SEC regulation, approved today, will allow companies to deregister their shares if U.S. trading is 5 percent or less of the firm’s daily volume worldwide. The rules will take effect before a June deadline for complying with Sarbanes-Oxley’s audit requirements, regulators said.

Bloomberg: SEC to Allow Companies to Withdraw From U.S. Listings