August 15, 2022

Accounting News Roundup: Sarbanes-Oxley and Tax Reform Sans Trump | 09.11.17

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Mike Pence is hoping he gets to sit down soon. 


Back in July, we noted a hearing on Sarbanes-Oxley where a slew of witnesses, including New York Stock Exchange President Tom Farley, spoke about its “great cost on corporate America” and that its “benefits are not entirely clear.” The requirement that companies comply with SOX 404, the requirement that auditors attest to a company’s assessment of its internal controls, received the brunt of the anti-SOX contingent’s criticism.

Last week, a couple of columns — one from CFO and another at The New York Times — noted the work of Matthew Ege of Texas A&M University, along with Dain Donelson and John McInnis of the University of Texas at Austin. It’s the first research that “provide[s] the first evidence that weak internal controls are associated with a higher risk of unrevealed accounting fraud.” A key finding it the study is noted in both columns; here’s Gretchen Morgenson in the NYT:

Auditors had identified material weaknesses in financial reporting at about 30 percent of the companies that later disclosed accounting problems. Chief executives were named in 111 of the 127 fraud cases, and chief financial officers were identified in 108 of the cases.

Maybe I’m wrong, but that strikes me as a clear benefit thanks to SOX. You can gripe about its cost or certain tedious tests, but the link between lousy controls and the potential for fraud is compelling. And it’d be pretty reckless for anyone to ignore it.

How’s tax reform coming along?

Here’s some nameless guy quoted in The New Yorker:

“The business community has been very aligned privately with leaders on the Republican caucus, both House and Senate,” a Wall Street executive who backed Hillary Clinton but supports certain parts of Trump’s agenda told me. “Everybody believes reform will happen or not happen irrespective of Donald Trump. That’s the big change. I believe we will have tax modification. I believe Trump will have nothing to do with it. It doesn’t matter whether he does or doesn’t.

So in other words, if the business community and Republicans don’t mind if Donald Trump will take credit for tax reform, I guess it’s going okay? Tax reform is a very, very big if. Donald Trump taking credit for it, should it happen, is not.

Elsewhere in tax reform: Would Workers Benefit From A Corporate Tax Cut? Not Much

Previously, on Going Concern…

We announced the release our accounting compensation report.

Over the weekend in Open Items, someone who’s accepted a full-time offer with a Big 4 wonders about a spring internship with a different firm.

In other news:

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