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Wednesday, April 11, 2007
Retired Congressman Michael Oxley blames the PCAOB for starting "all the problems" with the Sarbanes-Oxley Act
Well it seems all the pain, agony, and expense we've all experienced while implementing the requirements of "Sarbanes-Oxley" was all just a big misunderstanding. The originating law makers actually intended the process to be much easier and much more focused on a risk-based approach. Somehow, the executing agencies and audit community just misunderstood the real intent- that is according to a recently published interview with Congressman Oxley in CFO Magazine.
According to the interview with CFO Magazine, Congressman Oxley says "It was Auditing Standard No. 2 [the standard for auditing internal controls over financial reporting], promulgated by the PCAOB, that started all the problems."
He further elaborates by stating "Of the complaints you hear [about Sarbox], 99.9 percent are about 404. It was two paragraphs long, but by the time the PCAOB was done, it was 330 pages of regulations. It was far too prescriptive and [more] expensive than anyone anticipated."
Take a quick look at the attached article. It's very enlightening.
Also, you'll be pleased to note that Congressman Oxley believes the true intent of the law is only now being realized. His most encouraging quote is a resounding call for a risk based approach to risk management. For example, he is quoted by CFO Magazine stating, "the Securities and Exchange Commission proposed a risk-based assessment to better define material weakness, with more emphasis on internal audit. It adds flexibility with smaller companies. Those are common-sense proposals that I am confident will be adopted this year with a 5-0 vote, which would be a ringing endorsement of [SEC chairman Christopher] Cox's leadership and reaffirmation that the SEC and PCAOB want it to work in a more efficient manner. It will protect the investor and make regulations work to everyone's satisfaction."
Personally, I like the use of Congressman Oxley's reference to "common sense." If we were all able to define, implement, and manage our risks based on common sense and traditional ROI principals, I think we would all find it easier to embrace the true benefits of quality and compliance programs. The emphasis would shift from "what do we have to do to comply" to "what do we need to do to optimize operations and returns." Herein lies the financial controls challenge of the this decade. How do we make the shift from "a world from an auditors perspective" to "a world from an operations perspective."
posted by Zeleon @ 11:29 PM
 
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