Congress’ Version of Sarbanes-Oxley: Car-Box?

Posted on 08. Feb, 2006 by in Accounting

I’m not sure if you’re aware or not, but fairly recent legislation has provided job security for almost every accountant. It’s called “Sarbanes-Oxley” or “SARBOX” for short – and it was created in the wake of Enron and WorldCom to prevent similar corporate fraud. It’s basic function is to (1)formally assign responsibility to executives for their financial statements and (2)ensure that corporations have internal controls in place to prevent financial statement fraud. The legislation has come under fire since it’s inception due to the high cost to companies to comply. However, Arthur Levitt (former chairman of the SEC) wrote a great article recently on the need for congress to have its own version of Sarbanes-Oxley to prevent governmental fraud.

Levitt argues that the federal government is plagued by some of the same problems that have been hurting corporate America, primarily a lack of transparency, accountability and independence. I can’t really do the article justice, but here are a few of my favorite quotes:

Every day the SEC would receive letters from lawmakers opposing some proposed regulatory change — letters that eerily mimicked the rhetoric of one industry trade group or another.

And when all else failed, lobbyists would cash in their chits with members of relevant House and Senate committees to threaten the SEC — an independent regulatory agency — with budget cuts to get what they wanted.

…Accountability must be restored. Currently, Congress’ ethics committees resemble some of the worst corporate boards from the mid-1990s — appointed by management and wholly dependent on it for career advancement.

But ultimately, no rule or regulation can transform an organization on its own. What’s needed is a cultural change in which those who do the bidding of lobbyists, cash in their positions on Capitol Hill for huge paychecks and accept gifts are scorned, not praised. Accomplishing that requires real leadership, and that’s something that only we — as citizens and voters — can give to ourselves.

Levitt makes some great observations from both inside and outside Washington and proposes measures that I think can do nothing but help the situation – but as he says at the end of his article, the change in attitude has to come from the voters who put the politicians there in the first place.

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