Gretchen Morgenson writes in the NY Times about efforts to roll back the post-Enron reforms of Sarbanes-Oxley. It is astounding to imagine that the very provisions that restored trust in public companies after the series of accounting frauds of the Enron era are already being described as burdensome and costly.
What is burdensome and costly, of course, is financial fraud. We cannot imagine how executives can argue that neither investors nor insiders need to know whether their internal controls are effective. Morgenson says:
Seismic accounting scandals like the ones that sank Enron and WorldCom in the early 2000s have, happily, been scarce in recent years. But they may well resurface if elements of the Sarbanes-Oxley Act, the law created to curtail accounting fraud, are rolled back as some corporate executives are urging.Tom Farley, president of the NYSE Group, which operates the New York Stock Exchange, is among those leading the charge. In congressional testimony in July, he criticized the law’s provision requiring auditors of publicly held companies to report on and attest to management’s assessment of internal controls on financial reporting. The requirement is costly and burdensome to companies, Mr. Farley said, and helps to explain why the number of public corporations in the United States is declining.He urged lawmakers to review the requirement because markets had evolved since it became law.