In a recent interview with Fox Business’ Regulation Nation, John Allison, former CEO of the BB&T Corporation, spoke about the impact that the Sarbanes-Oxley (SOX) Act of 2002 has had on American companies in the decade since the accounting legislation was put into place.
Speaking with Fox, Allison argued that despite introducing a complex framework of accounting management requirements that call for companies to jump through considerably more hoops than previously, SOX has not actually decreased fraud. Rather, he posited, the resources sunk into it were misdirected into “irrational, non-effective risk management.”
“There has been an exponential increase in regulatory impact on business, which is clearly reducing our standard of living because businesses are spending intellectual capital, their time and energy making government bureaucrats happy,” Allison told the news source.
Allison was a panelist at the 2012 COMMIT!Forum on corporate responsibility, which took place earlier this month on Wall Street and was attended by more than 700 chief executives, corporate responsibility and sustainability officers, policy makers, thought leaders and academics. The forum featured a series of sessions around the theme of “UnConvention,” including plenary and breakout panels titled “Crony Capitalism,” “Dual Deficits,” “Digital Freedom” and “Energy Security.”
E&Y presents less negative view of SOX
A report released by Ernst & Young earlier this year acknowledged that the bulk of SOX-related criticism has centered on Section 404 of the legislation, which relates to internal controls over financial reporting. However, as noted in the report—titled “The Sarbanes-Oxley Act at 10: Enhancing the reliability of financial reporting and audit quality”—a series of regulatory and legislative actions have been taken since the standards were enacted in July 2002, with the goal of making accounting compliance less arduous while still allowing the regulations to remain comprehensive.
Unlike Allison, who views SOX as ineffective, E&Y’s Americas area managing partner, Steve Howe, believes SOX serves as a solid platform upon which to build better compliance and audit quality guidelines. In a March testimony before the Public Company Accounting Oversight Board, a nonprofit corporation created by SOX, Howe said, “The foundation for audit quality was strengthened by Sarbanes-Oxley; we believe there are opportunities that should be pursued to build on that strong foundation.”
||A decade after the Sarbanes-Oxley Act was introduced, there is still disagreement over the effectiveness of the accounting legislation.