Costs of Compliance with Sarbanes-Oxley

Here is some stuff on how the internal controls requirement of Sarbanes-Oxley is driving up costs for some businesses.

Starting next year, manufacturers will have to prove that they can trace their products from assembly line to customer. Temp agencies will have to show that the hours they bill match those worked by their employees. And public companies in all industries will have to document that they have similar systems to keep their books in order.

Part of my problem with this is that it is even more subjective than other things in accounting. It is in a company's best interest to have good internal controls to prevent fraud and waste, but the definition of "adequate" is open to interpretation. Auditors may feel a company needs more when the company feels things are fine. I still say that Sarbanes-Oxley is a failure because it doesn't totally eliminate the biggest problem with the audit process – conflict of interest. Until audit companies are rewarded for exposing corporate accounting problems, I don't think they will do the job they should do. (A few highly ethical ones will, but overall the desire to do good just isn't that great a motivator for most people).

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