Jack TenneyExtra Point

by Jack Tenney, Publisher

May 2007

Sarbanes-Oxley

Imagine where we small business people would be if we had to comply with SOX.

SOX, as you know, stands for the “Sarbanes-Oxley Act of 2002” (often shortened to SOX). According to Tech Target — the medium that provides enterprise IT professionals with the information they need to perform their jobs — it is legislation enacted in response to the high-profile Enron and WorldCom financial scandals to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise.

The chief requirements for public companies and their professional auditors have to do with keeping records, especially electronic data, regarding the company. In short, the message is threefold: “DON’T DELETE ... I REPEAT, DO NOT DELETE ... JUST TO BE CLEAR, KEEP EVERYTHING.”

If that pertained to small businesses like mine, I would still have five years’ worth of weather records and jokes. You see, every day I get a flash report on important stuff like cash receipts, with an intro, weather info and a conclusion containing humorous, insightful, entertaining or provocative (sometimes all four) items. I clear my e-mails more often than Carl Rove, so I only have a month’s worth of financial data plus weather plus chuckle/groan/grimace/guffaw stuff.

Do CPA firms really have to comply with SOX while on audits? If so, I’m glad I carried the old leather bag decades before that law kicked in. 

We didn’t e-mail back then. Actually, ballpoint pens were relatively new. So all descriptions of audit work, scope, opinions, points and the like were dutifully written up, numbered as appropriate and added to the audit bundle. The bundle grew to a few inches by the end of a year’s audit, held together by a long brass pin through the upper left corner of all the sheets.

(It wasn’t until I got into the real world that I found out that the reason 13-column worksheets had a perforated tab on the upper right side was to accommodate folding the sheet for inclusion in an audit bundle. You would have thought some fancy-schmancy professor could have given me a heads-up about that so I wouldn’t be snickered at by senior nerds on my first assignment.)

I digress. Sorry.

My extra point is this: As an aggressive junior auditor, I was always finding stuff that I felt materially affected the fair statement of the client’s financial condition — always in ways the client wouldn’t be too pleased with, mind you. So I just wrote ’em up — put my great ideas in writing, usually on a sheet of lined note paper, signed with a flourish, punched neatly in the upper left corner and inserted in the bundle.

The seniors on the job routinely ripped my observations out of the bundle, wadded them up and filed them in the nearest wastebasket.

They couldn’t do that today.