A new report says Section404 of Sarbanes-Oxley is having
devastating implications for small- and medium-sized companies,
whacking them where they live.
"Sarbanes-Oxley Section 404: The 'Section' of Unintended
Consequences and Its Impact on Small Business," written by the
nation's largest high-tech trade association, the American
Electronics Association (AeA), also says the section will not
stop the fraud it was designed to prevent.
"What struck me in talking to peers at small businesses -- the
nation's job growth engine -- was that the scale of costs was so
out of control it was starting to have a serious impact on their
ability to do business," says Alex Davern, chairman of AeA's
Sarbanes-Oxley Advisory Committee and CFO of National
Instruments Corporation. "The Securities and Exchange
Commission (SEC) estimated implementation costs at $1.5
billion, but the true cost is closer to $35 billion for the first
year."
He adds: "Internal controls do not detect collusion by corporate
executives. It's like the emperor's new clothes: People know it but
are afraid to say. When the next corporate fraud happens -- which I
guarantee is going on now -- investors are being misled into
believing that risk has been removed. "
The SEC won't re-evaluate Section 404 until January 2006, which
Davern is too long a wait. [For more, go to http://www.aeanet.org/GovernmentAffairs/gajl_soxrecap0105.asp.]
Contact: Alex Davern, 512.683.5325, [email protected]