The American Spectator

“Smaller companies spent an average of $3 million on compliance with section 404, and larger ones an average of $8 million. The initial SEC estimate of costs was $91,000 per company on average, suggesting that the SEC staff had little understanding of what their regulation actually required.” (Peter Wallison and Cameron Smith, “Reforms for the First 1000 Days”)

“Through a study of stock market reactions…the evidence reveals that investors likely consider the Act to be bad news for business.” (Ivy Xiying Zhang, “The Economic Consequences of the Sarbanes-Oxley Act”)

“The Senate passed the Sarbanes bill unanimously, and the market fell an additional 283 points.” (Wallison and Smith, op. cit.)

“The data do not support the view that the legislation will improve corporate governance.” (Roberta Romano, “Quack Corporate Governance”)

“Concentration on minutia… redundant and inefficient… adversarial relationship with audit firm… form over function… unrealistic requirements on small and developing companies…. Based on initial quotes, we expected direct implementation costs to be $300 thousand. Out actual direct costs exceeded $1 million and indirect costs exceeded another $1 million. These costs are borne by shareholders.” (Apex Silver Mines Limited, Letter to the SEC)

“Dealing with risks on the basis of a remote likelihood not only imposes huge costs but also makes this a nitpicking process.” (Confederation of British Industry, Letter to the SEC)

“An atmosphere of near paranoia…the public accounting firms have increased their aversion to risk to an extreme degree.” (Mortgage Bankers Association, Letter to the SEC)

And finally: “External auditors are reluctant to give advice with regard to interpretation and application of complex accounting rules in order to avoid possible criticism in regards to their independence.” (Commercial Federal Bank, Letter to the SEC)

Consultation regarding the proper application of accounting standards may be viewed as an internal control deficiency! This is the reduction to absurdity of the behavior induced by Sarb-Ox.

p> Regulatory Response br> Consider the response of the two regulators in this matter, the SEC and the Public Company Accounting Oversight Board, or PCAOB. When faced with overwhelming evidence of the results of how their own rules generated this expensive morass of bureaucracy and paperwork, the SEC and the PCAOB blamed the accountants. /p>

Confucius described taking responsibility as follows: “The way of the higher man is like the archer. When the arrow misses the center of target he seeks for the cause of the failure in himself.”

The SEC and PCAOB did not follow the way of the higher man as described by Confucius.