May It Please the Court® A Weblog of Legal News & Observations
Quote of the Day - What we call 'Progress' is the exchange of one nuisance for another nuisance. - Havelock Ellis

'Material Weakness' In Sarbanes-Oxley May Result In Changes

The words Sarbanes-Oxley can strike fear in the hearts of most CEOs, especially small- to medium-sized businesses who end up paying a small fortune for compliance, forcing many to go dark and delist themselves from various stock exchanges.  If your company is considering such a change, you may want to wait and see what happens in the near future with possible upcoming changes to the law.

Congressman Michael Oxley was in town at the Fairmont Hotel (we remember it better as the Sutton Place) and spoke to Orange County business leaders about SOX.  According to the article, the law's co-author called it a "flawed jewel."  You think?  No kidding.

Oxley himself pointed out the statute's flawed requirements using an example in his own district, Ball Metal.  The auditors there listed the janitor's theft of a few toilet paper rolls from the company bathrooms as a "material weakness" that had to be listed on the company's reports to the SEC and investors. 

I don't know about you, but I'm selling my stock in Ball because those rolls of TP will likely break the company.  Riiiight.  They likely spent more money on the reporting aspects of that issue than the cost of the missing rolls.  While Oxley didn't commit to amendments to the law, he did pin his hopes on Orange County's Chris Cox, now at the helm of the SEC.  Oxley stated in the Register's article that he expects Cox to loosen the "too stiff" burden of SOX compliance on small and midsize businesses.

That would be a welcome relief to many businesses considering delisting.  The question at hand is whether we wait and see or delist and save money now. 

Come to think of it, should the auditors include the cost of SOX compliance as a "material weakness?"  Compared to toilet paper rolls, probably so.


Posted by J. Craig Williams on Wednesday, August 24, 2005

MIPTC Home | View Weblog Archive

Back to top.