SOX Center

Jack Ciesielski submits: CFO.com reports that Senators John Kerry (Massachusetts) and Olympia Snowe (Maine) have sent another letter to SEC Chairman Christopher Cox requesting further delay in the implementation of the Sarbanes-Oxley Act’s Section 404 for small companies.

It’s deja vu all over again: they sent a letter to him last February on the same subject.

Here’s a link to the letter. The senators didn’t ask for a specific extension - but wanted an answer from Chairman Cox in 30 days. Last time, the specifically asked the SEC to give small firms until the end of 2008 to have management report on their internal controls, and another year afterwards for the auditors to report on the same.

Yahoo.com: The Protected Class: Senators’ Request For Sarbox Delay - Part II

Almost three-quarters of the chief financial officers in the US believe that Sarbanes-Oxley should be “repealed or reformed” as the costs of the 2002 compliance law have outweighed the benefits, according to a survey.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Most business groups and US law makers believe the law does not need to be repealed, although a majority believe that reform of the way it is implemented is needed.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

IRS agents are drilling dry holes during corporate audits, the Japanese version of Sarbox, a new spin on insider trading, issuing debt without all the paperwork, and how to keep workers safe, but also help them die.

When Mark Everson took office in 2003 as commissioner of the Internal Revenue Service, he promised that collecting underpaid corporate taxes would be a top priority, and backed it up by increasing the number of large corporate audits. Results were quickly realized, with additional recommended taxes doubling in fiscal 2005 compared with the previous year (see “Crackdown,” January 2006). But now Syracuse University’s Transactional Records Access Clearinghouse (TRAC) suggests the effort may have run out of steam.

CFO.com: Not So Taxing?

Sarbox ‘no longer makes sense from a cost and administrative perspective’ says chemical giant’s CFO as ICI prepares to leave New York Stock Exchange.

ICI is gearing up to leave the New York Stock Exchange to free itself from the blight of Sarbanes-Oxley compliance.

The company predicted a £4m annual saving from the de-listing based on the costs ‘incurred using external suppliers and auditors to provide ongoing support to the company’s Sarbanes-Oxley compliance’.

Alan J Brown, ICI’s CFO said: ‘ICI will continue to comply with the Combined Code on Corporate Governance and the UK Listing Authority listing rules and maintain quarterly reporting. However, it no longer makes sense from a cost and administrative perspective to submit to the reporting obligations under the Exchange Act.

AccountancyAge: £4m-a-year Sarbox millstone forces ICI to abandon US listing

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

As the SEC and PCAOB continue to revise their internal-control standards, what should small businesses do in the meantime? A few are asking senators for an extension.

More than 6,000 public companies face a serious dilemma about their Sarbanes-Oxley compliance: Should they use the current version of Section 404 now in reviewing internal controls over their financial reporting? Or should they wait until the Securities and Exchange Commission and Public Company Accounting Oversight Board issue final revisions later this year?

Decision time is approaching fast. Small businesses — or so-called non-accelerated filers — have until they file their 10-Ks for fiscal years that end on or after Dec. 15, 2007, to meet 404’s management assessment requirement. It’s a deadline that the SEC has extended several times, including that of the auditors’ attestation reports (non-accelerated filers don’t have to complete those documents until their 10-Ks are filed for fiscal years ending after December 15, 2008). And small-business advocates are hoping the SEC will extend those dates once again.

CFO.com: Could Small Biz Get Another Sarbox Reprieve?

Chief Counsel for Advocacy Thomas M. Sullivan today commended the U.S. Senate Committee on Small Business & Entrepreneurship for holding a hearing on the impact of Section 404 of the Sarbanes-Oxley Act on smaller public companies.

In written testimony, Sullivan said, “The topic of how the Sarbanes-Oxley Act impacts small business is an important one, and the small business community will benefit by this Committee’s focus on the proposals under consideration by the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB).”

Sullivan noted that Advocacy’s involvement with the issue began in 2002 when the office asked then Chairman Oxley and Chairman Sarbanes to include flexibility in their bill sufficient to avoid unnecessary impacts on small public firms. Since then, Advocacy has issued several comment letters to the SEC and the PCAOB, held public roundtables, and given testimony before the U.S. Congress.

Yahoo!Finance: Advocacy Commends Senate Hearing on the Sarbanes-Oxley Act

Complete copy of the testimony

The scam well has apparently run dry. Con artists that lack the scope to pull off a Ponzi or boiler room plot are using the Sarbanes-Oxley Act to dupe unsuspecting compliance managers.

A grafter, claiming to be a known FASB staffer, is preying on companies in an attempt to get them to purchase Sarbox compliance books, says the Financial Accounting Foundation, the parent organization of the Financial Accounting Standards Board. According to a FAF official, a handful of public companies received phone calls recently from a bogus salesperson claiming to be the staffer. During the calls, the salesperson insists that companies are obligated, by law, to purchase the Sarbox compliance books that are being offered.

CFO: The Sarbox Scam

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

Retired Congressman Michael Oxley blames the PCAOB for starting “all the problems” with the Sarbanes-Oxley Act.

Michael Oxley has been guaranteed immortality — and perhaps a degree of infamy — since his name was affixed to the Sarbanes-Oxley Act of 2002, the most comprehensive set of corporate rule changes since the 1930s.

Earlier this year, Oxley retired from Congress after serving 25 years. However, the 63-year-old Republican from Ohio is not ready to fade from the scene. In the last month, he has picked up two new jobs, as counsel for the Cleveland-based law firm Baker Hostetler and non-executive vice chairman of Nasdaq.

The act that bears his name missed unanimous passage through Congress by a mere three votes in the House, and initially received grudging lip service from a shaken corporate America. But a little noticed section, just 168 words long, soon changed the debate from whether Sarbox was essential to restoring confidence in the U.S. capital market to whether it was destroying it. Section 404, which required companies and their auditors to examine and report on the processes behind their financial reporting, quickly became the most expensive and hated provision of the act.

CFO.com:Oxley: I’m Not Happy with Sarbox