Jan. 13, 2005--Less than three years after the public scandals of Enron, WorldCom and Global Crossing first came to light, a group of companies is retaliating against measures put in place to prevent other such accounting debacles.
The group, comprised of several Washington-based business lobbyists, has claimed that some provisions within the Sarbanes-Oxley law are debilitating to businesses from a cost standpoint and are preparing to lobby for reforms to the law.
Sarbanes-Oxley was first drafted to establish controls on accounting and other financial management to secure better corporate governance and protect individual investors.
The provision in contention is Section 404, which requires the creation of extensive policies and controls within public companies to secure, document, process, and verify material information dealing with financial results. The highly anticipated and much dreaded provision went into effect after delays on Nov. 15.
The group argues that while the provision is appropriate for firms of 250,000 workers, its intentions are mislaid when it comes to businesses employing just 250 people. The cost of maintaining such controls can reach a staggering $500,000 per year, according to a study by CFO magazine. The lobbying group argues the cost, which includes the retention of auditors, is beneficial to the accounting industry, but excessive for small public companies.
The move by the lobbying group follows the formation of a panel within the Securities and Exchange Commission to evaluate the effect of Sarbanes-Oxley on small businesses.
Separately, a conference headed by the Financial Executives International group opened Wednesday at the Waldorf-Astoria hotel in New York City to specifically discuss the impact and implications of Section 404.