Volume 6, Issue 5

May 2012

I. The Sarbanes-Oxley Act – Ten Years Later

The Center for Audit Quality (CAQ) hosted a Power Breakfast panel discussion, “Sarbanes-Oxley, Ten Years Later,” during last month’s New York Ideas event.

In remarks prepared for the April 17 dialogue, CAQ Executive Director Cindy Fornelli observed that a decade after its enactment, the Sarbanes-Oxley Act of 2002 (SOX) is still misunderstood. SOX was a legislative response to a number of major corporate scandals that resulted in the collapse of companies, cost investors billions of dollars and shook confidence in our securities markets. She noted that, “Some have asked why SOX didn’t catch or prevent the [recent] financial crisis. But the fact of the matter is that the law was never intended to address companies’ business and risk management decisions.” Rather, SOX instituted stricter controls over the financial reporting process. It required the CEO and CFO to certify that their companies’ financial statements are accurate. It compelled public companies to evaluate and disclose the effectiveness of their internal controls. It assigned the responsibility of hiring and compensating the external auditor to the audit committee. It placed significant prohibitions on external auditors providing consulting services to the companies they audit. And it called for the creation of an agency to oversee public company auditors. 

Among those joining Cindy Fornelli (center) at a discussion of “Sarbanes-Oxley, Ten Years Later” were April Klein, professor of accounting at New York University’s Stern School of Business and former U.S. Senator Robert Bennett, now CEO of The Bennett Consulting Group.

Participants at the hour-long discussion included corporate executives, academics, public policy experts and the media. Former U.S. Senator Robert Bennett – who served in the Senate when the law was passed (and voted for the measure) – contended that Section 404(b) of the Act, which requires an independent audit of a company’s assessment of its internal controls over financial reporting, has dissuaded smaller companies from going public. His assertion was challenged by several others in attendance, including Alan Beller. Beller, who was with the U.S. Securities and Exchange Commission (SEC) at the time of the Act’s implementation, described SOX as a big company law. “It was designed to keep the Fortune 100 more honest than they had been,” he said. And Philip Howard, vice chairman of Covington & Burling, observed that “It’s often the case that you need a law to change the culture, and I think Sarbanes-Oxley served that purpose."

The CAQ was a supporting underwriter of New York Ideas, a forum for the exchange of ideas of consequence. Organized by The Atlantic, the Aspen Institute and the New-York Historical Society, the day-and-a-half long event assembled leading thinkers and policy makers to explore essential election-year questions focusing on the American identity.

II. CAQ Welcomes New Professional Practice Fellow

Natalie Protze, CPA, has joined the CAQ as a Professional Practice Fellow. Ms. Protze is a former audit senior manager in the Denver office of PricewaterhouseCoopers LLP.  She will help lead key initiatives and help guide the CAQ’s professional practice and public policy activities during her 18-month fellowship.

Natalie Protze

Protze has 14 years of experience auditing large multinational companies in the consumer products, manufacturing, distribution and retail sectors. She has led large multi-disciplinary engagements, including reviewing SEC filings, communicating with audit committees and interacting with regulators.

“We welcome Natalie to the CAQ team,” said Cindy Fornelli. “She brings an impressive background in public company auditing and will have a significant impact on our professional practice and public policy activities.”

Protze is the fourth participant in the CAQ’s professional practice fellowship program, which is conducted in collaboration with the CAQ’s member firms, and succeeds Carrie Cristinzio of Deloitte LLP. “Carrie has made a significant contribution to our audit policy agenda and activities,” Fornelli added. “We thank her for her commitment to the CAQ and appreciate her continued collaboration on key initiatives.”