The above editorial cartoon’s humor is based on its underlying truth. It seems everyone has high ideals as to how others should behave, but somehow we (individually and collectively) always seem to be the exception.
Working in finance and accounting, I painfully remember the implementation of the Sarbanes-Oxley Act (SOX) several years ago. Our audit fees doubled, as did the number of internal and external auditors following me around all day asking questions. The new client/auditor relationship was based on the presumption that the company was guilty until proven innocent. How did this happen?
The accounting industry was given great power after failing to detect fraud in several high profile corporate failures (Enron, WorldCom, HealthSouth, et. al.) I found it ironic that those involved in the failure were given such authority in the aftermath. Another irony was the internal control of the accounting firms. After hearing of an internal control failure with our audit firm, I asked about the firm’s documentation and control procedures and the response was shocking.
A manager-level auditor told me that it was a good thing their firm was a private company, it could never withstand the scrutiny they were putting us under. When our audit firm realized that they would be audited by the Public Company Accounting Oversight Board (PCAOB). They voiced many of the same objections corporations did when they fell under the SOX guidelines. So who’s watching the government?
Periodically, U.S. public corporations will receive what is referred to as a “comment letter” from the Securities and Exchange Commission (SEC). The SEC letter is asking you to comment and defend positions taken in public filings. Non-compliance can lead to stiff penalties up to jail time. With this type of power the SEC must be a bastion of purity, right? Not hardly.
In a 2006 audit, the Government Accountability Office (GAO) found The SEC has its own set of problems over bungled books – with millions in cash slipping through the cracks, and a computer system so vulnerable that hackers can run wild inside Wall Street’s watchdog agency. The audit stated the SEC has failed to maintain controls in three key areas – security of its computer system, handling of the cash paid in disgorgement and penalties, and keeping track of equipment and assets. So are we back to where we started with public corporations taking the high road?
Unfortunately not. Recently, a liberal acquaintance of mine pointed out the hypocrisy of most corporate leaders. She was right. As conservatives, we talk of personal responsibility and accountability, but when the government starts doling out the money we push our way to the head of the line so we can gorge ourselves. As my liberal acquaintance noted, the country is a democracy for people losing their house, but socialistic if you are a large corporation going broke.
For the most part, our choices led us into our present situation. Things are funny when it is ‘those guys’ doing it and not us. Who sent me the cartoon? The local partner of the Big-4 accounting firm that audits our books.