The U.K. government's 2009 budget includes a provision requiring the chief accounting officers of major corporations to certify that they have adequate controls over their tax reporting. The U.K. press and certain accounting firms have seized on this — with great concern — as the imposition of Sarbanes-Oxley-like requirements on U.K. companies, with accompanying cost burdens. Now, as I commented in a May 4th article for the FSN online newsletter, it is not clear whether the requirement goes as far as Section 404, or is limited to the reasonable requirements of the Section 302 certification. We will have to wait to get clarification from the U.K. government.
But this outcry of alarm in the U.K. made me think (yet again) about the value of Section 404 in the United States. Certainly, the level of compliance work required of companies has been excessive and missed the overriding issue of corporate culture and the control environment. But have we actually benefited overall?
The level of financial restatements (once the restatements for trivia slowed) is down. While there have been a number of corporate frauds, how many accounting irregularities would have occurred during this period of pressure to make ever-increasing financial targets?
Was this a bitter pill that we are actually better off for having swallowed?
I welcome your comments.