The lead article in the August 20 - September 9, 2007 issue of Accounting Today is called SOX at 5 - The profession reflects on a milestone. It is frankly hard to believe that this legislation is already 5 years old.
Issued on the heels of the Enron, Worldcom and other frauds, Sarbanes-Oxley was intended to restore investor confidence in the financial reporting. Many believe it has done that, and it has done a lot more.
For one thing, the largest accounting firms are busier and bigger than ever. When I started at the Detroit office of what was then Deloitte Haskins + Sells in September 1984, there were of course large multinationals like General Motors. But there also was an entire department focused on serving "small" businesses - $5 million to $100 million. I was the senior on the audit of a publicly held company that did about $100 million in revenue.
Now, businesses like that are too small for the "Final 4" accounting firms. Those businesses have been snapped up by the second tier of firms - Grant Thornton, BDO Seidman and others. The second tier have moved up the chain, and what used to be their bread and butter, the "small" business has been left behind.
That has been good for our firm, of course.
Back in my Deloitte days, we used to joke that the 1986 Tax Reform Act was an "Accountants Full Employment Act." It may or may not have been, but Sarbanes-Oxley is definitely The Accountants Full Employment Act. There is greater demand for accountants and, especially, auditors, than ever before.
I go back and forth on this. As someone who has done and still does a lot of financial statement auditing, it is nice to have what I do be in demand. But it bothers me that it took catastrophic audit failures and the collapse of Arthur Andersen to make this happen.
Like I said in the title, I think this is an unintended consequence of SOX.