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Current Debate is More Nuanced Than it Appears
(Letter to the Editor - Seattle Post-Intelligencer July 19, 2007)
http://seattlepi.nwsource.com/opinion/324185_ltr19.html
Regarding Charles Pope's July 17 recount of the Sarbanes-Oxley Act's ("Businesses say accounting reform costly, onerous") attempts to simplify the current debate as a cost versus benefit argument: The issue is more nuanced. Attempts to reduce costs associated with compliance can -- and must -- be balanced with maintaining investor protection and confidence.
Studies show that the cost of complying with SOx declines from the first year to the next as companies and auditors better integrate their financial statement and internal control processes. Moreover, new measures adopted this year should bring further efficiencies.
Last fall, Gallup found that 54 percent of those surveyed have confidence in the markets. Compare that with 2002, when Gallup measured investor confidence at 31 percent -- and about $5 trillion had disappeared from the markets since 1990s peak. And, the Dow Jones topped 14,000 this week -- its highest average ever.
A recent panel discussion in Seattle hosted by the Center for Audit Quality heard comments from local business leaders, investors, academics and Washington state's attorney general emphasizing that costs and benefits can be balanced. We'll further explore this sentiment with regulators and the legislation's authors in Washington, D.C., to mark the signing of the act on July 30.
As we look to the next five years of the Sarbanes-Oxley era, all stakeholders in the capital markets should keep an eye toward implementing the landmark legislation so that markets and investors are both protected. With Sarbanes-Oxley, like most things, cost and benefit is not a zero sum game.
Cynthia Fornelli
Center for Audit Quality
Washington, D.C.
