Getting Out Of The SarBox 404 Box
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posted overnight that the SEC approved new guidance yesterday for how to implement Section 404 of Sarbanes Oxley, which has caused no end of complaints due to its high cost of compliance.
The SEC press release posted yesterday is virtually an apology for the burdensomeness that has become SOX 404:
"Congress never intended that the 404 process should become inflexible, burdensome, and wasteful. The objective of Section 404 is to provide meaningful disclosure to investors about the effectiveness of a company's internal controls systems, without creating unnecessary compliance burdens or wasting shareholder resources," said SEC Chairman Christopher Cox.
"With the Commission's new interpretive guidance for management on the evaluation and assessment of its internal controls over financial reporting, companies of all sizes will be able to scale and tailor their evaluation procedures according to the facts and circumstances. And investors will benefit from reduced compliance costs."
The Public Company Accounting Oversight Board approved the streamlined auditing rules earlier today, which essentially direct accounting companies to focus their audits on those risks deemed most important.
Yeah, like making sure Turbo's paycheck makes it from the IBM account through the Intertubes to the direct deposit in his Intertubes bank!
If size is any barometer, the new accounting standard is 59 pages, a third of the size of the one it's replacing, according to MarketWatch.
Tech Trader interviews tech analyst Gerard Hallaren, who thinks Wall Street is missing the import of this news. He asserts it could cause a drop off in corporate spending on compliance technology.
But the rising accounting standard tide should also lift most boats, with the same analyst saying the lowered spending on SarBox compliance could boost 2008 corporate profits by 2 percentage points.
If the massive trend to capital moving into private equity takeovers, along with executive talent, then probably some relief was warranted.
But also don't forget that those rules were put in place for people like Inmate #14343-179, one Andy Fastow, the former chief financial magician at Enron who could make off-balance sheet capital disappear with the snap of a Star Wars character, and who's now livin' it large at the Oakdale Federal Detention Center down in Louisiana until December 17, 2011.