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| Governmental Regulations |
| Sarbanes-Oxley Act: Section 404 SOX it to'em |
The Securities Exchange Commission (SEC) has scheduled a rare Roundtable discussion in Washington for April 2005 in response to overwhelming criticism of the practicality of one nettlesome section of the new Sarbanes-Oxley Act. Section 404, a mere 170 words in the total text, requires companies and third-party auditors to document the procedures used to verify accuracy of financial statements.
The difficulty is related to vague language that leave businesses guessing about what companies must do and how much they will be expected to disclose in order to satisfy the law. “I think that the spirit of the regulations is excellent,” says Eric Reuter, president and chief executive of a medical-laser firm located in San Jose. But Reuter laments the significant expenses incurred by companies who are trying to comply. “How do we get to what the spirit of the rules is without sinking companies in all these extra costs?”
Other critics complain that some of the internal controls mandated by the legislation are inconsequential. Section 404 is hurting the very shareholders it is designed to protect, they argue. The U.S. Chamber of Commerce agrees. Section 404 alone has caused thousands of businesses to put off revenue-producing improvements like purchases of newer equipment, or investments in new product lines because the money and the manpower are currently swallowed up trying to establish Section 404 compliance, according to the Chamber.
Still others point out that most of the implementation costs are justified. Companies with the largest expenses are those who did not have the proper controls in place already, or who have not kept controls up to date, says Ann Yerger, executive director of the Council of Institutional Investors, a coalition of shareholders who backs the new measures.
Compliance with the Sarbanes-Oxley Act doesn’t have to sap your company’s productivity. Placement of one of our temporary professionals can help. Put Sarbanes-Oxley compliance into capable hands and leave executives and other core employees free to make the decisions that will build your business.
For more information about the SEC Roundtable, visit http://www.sec.gov/
Source: Strasburh, Jenny. “Corporate Backlash Over Sarbanes-Oxley Disclosure Law Called Overly Onerous; Firms Cite Compliance Costs.” San Francisco Chronicle. 23 March 2005. 23 March 2005. http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/03/23/BUGVCBR78D43.DTL&type=business.
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