As widely reported on September 29, 2011, the Justice Department has joined the SEC in investigating alleged accounting fraud at Chinese companies listed on U.S. markets. In response, the market punished several Chinese companies listed on the Nasdaq (as much as 23%) which in turn brought the Nasdaq composite down over 1%.
Accounting industry bloggers like Francine McKenna have been keeping a close eye on investigations conducted by the SEC and the PCAOB against Chinese companies and their auditors. The concern for many has been that the SEC's budget shortages and the PCAOB's status as a quasi-government agency would prevent real action against these companies and the auditors. With the Justice Department and the FBI involved in SOX enforcement, the watchdogs charged with safeguarding investors might have gained some sharper teeth.
It is interesting to see this battle ratchet up at the same time some Republican lawmakers, and even President Obama, want to weaken the Sarbanes-Oxley Act in the name of job creation. If anything, SOX preserves jobs. After all, it is designed to prevent the kind of accounting fraud that toppled Enron, WorldCom, and Tyco and protect the jobs of whistleblowers (like those at BofA and Bond Industries) who are wrongfully terminated in retaliation for objecting to their companies' accounting malfeasance.
It's up to proponents of ethics and financial integrity to bang the pro-SOX drum louder. Letters from accounting industry associations denouncing efforts to weaken SOX, as well as well-publicized enforcement of financial shenanigans, are a good start.
We would be interested in hearing of any examples from clients that indicate SOX-related work is costing jobs or reducing their overall corporate competitiveness. Please leave a comment or contact us directly.