Title: SOX Gone Silly: Sarbanes-Oxley Issues That Make CEOs Mad: Washington Says Most SOX Compliance Costs Are a One-Time Burden, but Community Bankers Believe SOX Is a Law That Will Keep on Hurting
Abstract: There is very little amusement to be found in the Sarbanes-Oxley Act. But Ron Walko did get one grim chuckle out of it, one of those grudging laughs one squeezes from an otherwise very bitter lemon of a law. Walko's Jersey Shore State Bank (through its holding company) is an accelerated filer under SOX. It was told by its audit firm that had a potential control deficiency on its hands--a serious issue. What was it? The lack of a written hire policy. This struck Walko as amusing, and I also thought that was ridiculous, he said. The bank has been in business for more than 70 years all that time managed to do pretty well without a written policy on hiring firing. No one ever considered that this was a basic control that had to be documented on paper. Then there was a development that was no laughing matter at all--the veteran employee in the wire room who had enough of SOX decided to fire herself. She came to the bank right out of high school, practically, says Walko, and she just was a master at doing what she was doing in our wire room. But the SOX process required her to work with the auditors on controls in her area of the bank. She got tired of the whole thing, the questioning the double questioning then the triple questioning, says Walko. Finally, she said she didn't want the hassle anymore, decided she'd retire now, at 65, rather than working until 70 as she'd planned. Now, takes pieces of three other employees' time to do what this single employee was doing. SOX has inspired controls thinking that has gone haywire. of these are silly controls, as far as I concerned, says Walko. They are not really weighted for dollar risk, but weighted for 'what if' type risk. When the audit firm began asking for paper verification trails on electronic transactions, it was really getting silly, says Walko, the bank pressed for, won, electronic logs instead. Other bankers taking part in a May ABA Banking Journal roundtable about life with SOX (identified near their photos) had their own stories to tell. Three of their organizations are accelerated fliers just coming to the end of their first round with the law, two were nonaccelerated fliers who had been working with SOX but who benefited from an extension on its effective date for their category of institutions. Overall, behind many of the bankers' comments is an ongoing frustration with federal regulation in general SOX in particular. The roundtable was held during the spring meeting of ABA's Community Bankers Council, of which all five bankers are members, one of them summed up the angst. If you look at this council meeting we're having here, it's not about banking, it's about compliance, says J. Kimbrough Kim Davis of Capital. It's about SOX, it's about Bank Secrecy Act issues, it's about the Community Reinvestment Act. These are all compliance related issues that are very important, but we're not here talking about banking anymore. The roundtable, summarized here, was held prior to the resignation of SEC Chairman William Donaldson, the SEC's beginning to review of how the impact of SOX on smaller organizations could be eased. ABA BJ What have been the costs of Sarbanes-Oxley? Hankey We know that our external audit costs more than doubled--and that's six figure numbers we are talking about. I'm not sure we know the true cost yet. Costs of implementation absolutely permeate the whole bank. Many of our senior people are constantly working with Sarbanes-Oxley, instead of working on ways to increase our bottom line. Indeed, almost every day, at some level, someone is dealing with a Sarbanes-Oxley issue of some kind. The act has caused us to put some additional personnel on the staff. In part, this came from our audit firm. …
Publication Year: 2005
Publication Date: 2005-08-01
Language: en
Type: article
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Cited By Count: 3
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