A Bloomberg report describes the folly that is the Sarbanes-Oxley Act. SOX has caused companies to divert resources from consumer-serving operations into the installation of new computers and the hiring of additional accounting workers. SOX forced Yellow Roadway Corporation to hire 10 additional employees and 20 consultants to help write new accounting software. The extra $10 million it spent could have purchased 130 heavy duty truck cabs.
SOX has caused auditors to interpret audit control rules in a draconian fashion, for which their fees have ballooned. For example, auditors typically require non-core bookkeeping activities of a company to be documented, no matter how irrelevant. The auditors claim they must require an unreasonable level of accounting documentation in order to avoid lawsuits and scrutiny from federal inspectors.
Helping their clients by using more rational interpretations of SOX is illegal. A vague auditing standard dictated by the Public Company Accounting Oversight Board prevents auditors from communicating with their clients because such client service would compromise the auditors’ independence and subject them to conflicts of interest. I am not making this up.