IMA: 'Support Much Needed SOX Reform'

The Institute of Management Accountants (IMA) applauds the formation of The Committee on Capital Markets Regulation and related initiatives to address the problem with boldness rather than incrementalism and status quo approaches. We frankly do not understand why there has not been a greater sense of urgency given the following market observations: 1) smaller publicly-traded companies, the heart and soul of American entrepreneurship, de-listing or seriously considering to de-list to avoid heavy handed regulation implementation; 2) sub-optimal implementation by large businesses, distracting them from the business of doing business; and, 3) a clear shift away in investment in U.S. capital markets due to inordinately high regulatory risk.

September was the deadline for public comment on the SEC’s “concept release” as a prelude to its development of practical guidance that it hopes will allow management to comply with SOX much more cost effectively while ensuring the integrity of financial statements. Frankly though, we expect much of the same in terms of protecting the status quo, incremental baby steps that do not attach the problem with boldness, and, the audit firms continuing to defend their “home field” advantage.

IMA is proposing a specific solution to the SEC that is bold, will allow businesses to cost effectively comply with regulation using an approach that draws on the best of advances in the risk and quality fields, and most of all, puts tools in the hands of those who are correctly positioned to drive business performance and effect a positive audit outcome -financial professionals working inside corporations. These are professionals who have been educated specifically on how to design, implement and manage internal control systems so that the external auditors will only find good results for their assessment efforts. This is good for corporate performance and should have the added benefits of reducing huge, non productive audit fees and mitigated auditor risk.

It is noteworthy that elsewhere in world, all other regulators have evaluated the U.S. implementation regime of SOX and have stepped back from such intrusive implementation. This is especially notable because no one has actually produced any evidence that demonstrates any benefits associated with the U.S. implementation approach.

It is not too late to get it right on SOX compliance. But the clock is ticking and the global stage is watching – now is the time to be bold and decisive to restore U.S. global competitiveness. We all need to check our incrementalism at the door.