So what did the co-author of Sarbanes-Oxley say? At a gathering of accountants in Paris, reported in the International Herald Tribune, he acknowledged that the law went too far, excusing the excess by noting that ""it was not normal times."
He also laid the blame for Section 404 on Sarbanes.
Was Oxley aware, his questioners asked, that the law that he and Senator Paul Sarbanes, a Maryland Democrat, rushed onto the books five years ago after the collapse of Enron and WorldCom had contributed to a sharp decline in listings on U.S. stock exchanges? And, knowing what he knows now about the cost and effects of the law, would Oxley — who retired in January after 25 years in Congress — have done it any differently?
"Absolutely," Oxley answered. "Frankly, I would have written it differently, and he would have written it differently," he added, referring to Sarbanes. "But it was not normal times."
He's also less than impressed with the board his bill created, the PCAOB:
At the same time, Sarbanes was pushing through an even tougher version of the bill in the Senate, adding a requirement that companies conduct internal and external audits of their financial controls. That measure, known as Section 404, rang alarm bells among U.S. companies and foreign ones that feared it would exact punitive costs for good governance.Oxley said he felt at the time that Section 404 could spell trouble.
One reaction, he said, was that auditing entered a period of extremely conservative practice, encouraged by rulings from the Public Company Accounting Oversight Board, a new regulatory body created by Sarbanes-Oxley. The board gave the accounting industry "almost carte blanche to do almost everything they wanted to do, which turned out to be far more expensive than anticipated," Oxley said. "They just went crazy."Now we can wait to hear Sarbanes' side of the story.