SOX Opportunity Cost

Last week was the 5th anniversary of the Sarbanes-Oxley Act. The idea for a SOX-like legislation was floated by the Big Six (back then) many years before it was adopted. It took 10 years of lobbying, and several corporate scandals, before the Sarbanes-Oxley act was passed in 2002. There has been an endless amount of criticism and revising of the legislation to make compliance less onerous.

As a former external IT auditor, and a former Internal Auditor, I have to agree with John Dvorak when he says “This stupid law has to go.” At the micro-level, the only people who benefited from Sarbanes-Oxley are the partners at the big four firms, the auditors who are lucky enough to be US citizens, and a small army of underpaid H1B consultants.

Ironically, SOX may actually make it more difficult to pass a set of much-needed Accounting and Finance reforms that the Big 4 is pushing. We are long past the time when we needed paper and pencils to tabulate financial data. Finance and IT staff should be working towards improving the timeliness of information and improving transparency.

On a related but separate note, Sun Microsystems took a step in the right direction when they decided to release their quarterly reports as an RSS feed rather than to the news wires. This type of release makes it more timely for small investors, such as myself. I know that this went mostly unreported in traditional media, but I think it is an incredibly important step for US corporations.

The promise of high tech and this age of high-performance computing is that we can provide real-time reporting and rapidly disseminate information. Unfortunately, we’re squandering these resources by focusing on less important activities while enriching the partners of the Big Four.