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Home | Blog | Sarbanes-Oxley: Helping to Nationalize Accounting & Auditing

Sarbanes-Oxley: Helping to Nationalize Accounting & Auditing

October 8, 2007

Tags Financial MarketsInterventionismMoney and Banking

Sarbanes-Oxley, of course, was just a small step along the yellow brick road that will lead to total rule over private industry, especially in the realm of accounting and audit. Talk is heating up regarding the new Treasury Advisory Committee on the Auditing Profession. A recent Treasury release has Secretary Paulson stating that "this Committee has been chartered to develop recommendations as to what can best be done to sustain a vibrant auditing profession, a profession whose work is critical to investor confidence in our capital markets."

This committee, made up of some very powerful and statist players, will "examine auditing industry concentration, financial soundness, audit quality, employee recruitment and retention, in addition to other topics. Treasury expects the committee to produce findings and recommendations by early summer 2008." The government will also determine whether or not the structure of audit firms is proper, and whether the auditor profession is sustainable. The government is not hiding its omnipotent agenda; the fact that they will "examine" the employee recruiting and retention process should send some fairly transparent clues.

There is indeed a shortage of skilled players in the accounting/audit industry. Highly-skilled players are few, and the mediocre are many. That's because accounting and auditing are difficult to learn and are loaded with complex value judgments. The industry demands hard work, discipline, and a long-term commitment. The work force nowadays — most of whom were raised on daycare and TV and ankle tattoos — is loaded with undisciplined and lazy people who want easy jobs with gobs of vacation time and little-to-no responsibility. Thus this profession is not for them. When private contractual agreements between businesses and individual employees becomes the government's business, a totalitarian wake-up call must be sounded. What's so humorous is that the demand for skilled accountants, CPAs, and CFEs (Certified Fraud Examiners) has come about because of government regulation and because of the obscene difficulty in navigating the holy mess that is Sarbanes-Oxley — along with the other assorted "investor transparency" regulations. SOX demands highly-skilled consultants and individuals with a radical mix of exceptional skills. Most "accountants" are staff accountants with basic, low-level skills. Look at the job ads — SOX consultants are writing their own tickets. So, as it usually goes, government creates the skills shortage via its regulatory-created redistribution of resources, and then it creates a committee to investigate why the shortage exists.

Oops, that's not all. Donald Nicolaisen, a former chief accountant at the Securities and Exchange Commission, notes that auditors have become "overly cautious," and this has led to vastly increased costs for corporate clients. Really?!?! With the SEC and PCAOB yanking auditors and their audit recipients in opposite directions, it's no wonder that billing hours are up, and, amazingly, costs tend to rise with billing hours. Liability issues for any CPA looms like a purple elephant in the room, and the public accounting profession, as a whole, is in the gonna-get-you spotlight.

With SOX, the government has created a massive blunder, and each ensuing "fix" only makes worse the previous problem, until we eventually see the entire auditing and accounting rule-making industry become fully nationalized. But that's exactly what the regulatory dictators are hoping for.

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