
Global Audit Firms Are Lobbying  to Dilute Sarbanes-Oxley Reforms - frgtpsswrdlame
https://promarket.org/global-audit-firms-led-deloitte-using-lobbying-clout-dilute-sarbanes-oxley-reforms/
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jedberg
As someone who had to deal a lot with SOX compliance throughout my career, I
would love to see the regulations loosened. They are overly onerous and in
many cases downright bad, because they are so broadly written. At the same
time, enforcement is terrible, because of the same broadly written rules.

Basically, you and your auditor work together to come up with an overly
complex set of rules that somewhat meets the requirements, then your auditor
brings in a bunch of consultants to help you implement their rules, which
usually just means checking a lot of boxes, and then everyone calls it a day.

So really all it does is create a lot of work for a lot of people for very
little gain. In a lot of cases we were going to do some of that stuff anyway,
but now we had to slow down and show the auditor all the work. An auditor who
usually doesn't care -- all they want to do is be able to say "yep I watched
their presentation on this".

So I was quite surprised by the headline, that the auditor firms would want to
roll it back. It's basically just a huge money maker for them.

And then I saw what they want to change -- they want to make the rules looser
on _how the auditors are audited_. Basically they want to be able to keep
being lazy.

SOX had great intentions but was one of the most poorly implemented
regulations ever.

~~~
arethuza
I've seen some _very_ strange things done in the name of SOX compliance. I was
involved in the potential acquisition in the UK of a subsidiary of a US public
company and they used to print out their AD group memberships (as screenshots)
and have someone sign (wet sign - with a pen!) the printouts every week/month.

When I asked whether SOX compliance really required this they basically said
they didn't really know but had to play safe as the regulations were just so
vague.

~~~
maxxxxx
Reminds me a little of the medical device industry. We do a lot of things that
from an engineering perspective result in worse products but since nobody
understands the regulations fully we do them. Until a new guy comes in, re-
reads the rules and says we can do it differently now.

~~~
refurb
I work in the biotech industry and it's the exact same way. We have legions of
lawyers who try and decipher the regulations.

A great example is price reporting to the gov't. You're supposed to report
your net price across all sales to CMS on a quarterly basis. Problem is, the
regulations are so vague that it falls on companies as to how to interpret
them. Naturally, companies err on the conservative side (at least most of
them). My old company probably had 20 FTE's dedicated to this one regulation.

And if you reach out to the regulatory body for clarification, that's a multi-
year process. A great example is the AMP rule (average manufacturer price). I
think CMS was supposed to role out the clarification back in 2012, but only
finalized it last year. And there are still unanswered questions.

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chollida1
One of my good friends was an investment banker who specialized in IPO's from
2000 to 2011.

When ever I asked him about Sarbanes-Oxley chilling IPO's he would always say
that the only people who claim the legislation slowed down IPO's were people
on chat boards who had no relation to the process at all.

From an auditors perspective it might raise some complications but from a
companies perspective, it just codified rules that almost all public companies
were already doing.

I mean, even on hacker news, you'll find people parroting the sentiment that
Sar-box slowed down IPO's but they never really seem to be able to identify
just why, or what specific rule it is that is keeping companies private. n

Its always some non specific thing they point to, like more regulation or
liability of C level executives. I mean the retort is probably what percentage
of public companies have been brought private strictly because of this rule or
how many executives have been sent to jail under this rule.

The below article is from 2012 but it lays out my point pretty well I think:

[http://blogs.reuters.com/alison-
frankel/2012/07/27/sarbanes-...](http://blogs.reuters.com/alison-
frankel/2012/07/27/sarbanes-oxleys-lost-promise-why-ceos-havent-been-
prosecuted/)

~~~
arcanus
I'm not sure I agree.

I think that this has consolidated the IPO market to only a few major banks
that are capable of acting as underwriters.

Empirically, the number of IPOs in the USA has dropped, and the size has
increased. So the data is consistent with there being a larger regulatory
burden on businesses going public.

~~~
chollida1
> Empirically, the number of IPOs in the USA has dropped, and the size has
> increased. So the data is consistent with there being a larger regulatory
> burden on businesses going public

I'll agree with the first sentence. However it is not anywhere near enough to
imply the second sentence. And lots of smart people agree...

[https://www.bloomberg.com/view/articles/2015-06-24/where-
hav...](https://www.bloomberg.com/view/articles/2015-06-24/where-have-all-the-
publicly-traded-companies-gone-)

> The study also looked into the old argument that "regulatory and legal
> changes in the early 2000s, including Regulation Fair Disclosure ('Reg FD')
> and the Sarbanes-Oxley Act ('SOX'), made it more expensive" to list. These
> played little or no role because the decrease in new listings was "well on
> its way before these changes took place." At worst, the regulatory burden
> accounts for only a small portion of the decline.

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stretchwithme
Instead of so much regulation, I think there should be more focus on
incentivizing executives as if they were owners. Owners with most of their net
worth tied up in a company usually act more in the long term best interests of
the company. They care less about what Wall Street thinks and more about where
the company will be in 5 years, 10 years, 20 years.

Instead of stock options they can cash in when they hit short term goals, how
about actually buying stock and receiving stock that managers can only sell
several years after they get it?

At the very least, rate companies on whether they do this or not. Or are
actually managed by owners.

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RichardHeart
I believe audit firms are paid by the hour. I believe audit firms make more
money when they work more hours. I believe audit firms make more money under
Sarbanes-Oxley than not under it. If this is true, why would they lobby to
have less revenue?

~~~
jedberg
Look at they article. What they are lobbying for is looser regulations _on the
auditors_ so they can keep being lazy.

~~~
lavezzi
You say you read the article but I don't think you understood it. They want to
loosen restrictions so they can sell additional work (that they are currently
prohibited to provide) to public clients of which they provide audit services.

~~~
jedberg
I understood it perfectly. They want to provide more services so that they can
say "this is out of compliance but pay us money and we can fix it". But their
"fix" is just looking over your shoulder and checking a few boxes.

But the other part of what they want is then not have the government looking
over _their_ shoulder to see what they did.

~~~
lavezzi
I still don't think you understand. They are prohibited from offering
consulting services to audit clients which is completely different from
'compliance'. This is about auditor independence rules.

The article states that the Big 4 are lobbying against making PCAOB
disciplinary proceedings public. Disciplinary proceedings are and will be in
place in the future so i'm not sure where you are getting that they do not
want the government looking over their shoulder. Yes, in a perfect world i'm
sure they don't want the PCAOB breathing down their neck but it's part and
parcel of the job.

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lamontcg
Read this as "Global Adult Films are Lobbying to Dilute Sarbanes-Oxley
Reforms"

I need more coffee and a shower.

