Jeremy Kahn writes that the verdict is still out on whether or not Sarbanes-Oxley will be a success. My primary concern with business regulation is whether or not the benefits outweigh the costs, and that is part of the concern with Sarbanes-Oxley.
Perhaps the biggest unknown is whether the law's benefits will ultimately outweigh its hefty compliance costs. The Johnsson Group, a Chicago consulting firm, estimates Sarbanes-Oxley will add $3 million to $8 million in annual compliance costs for Fortune 500 companies. And we probably won't know if the new law actually prevents fraud for some time. As David Hardesty, an accountant who has written a manual about the act, explains, it's mostly at the end of long bull runs, when companies are struggling to meet earnings expectations, that frauds tend to take place.
