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When SOX is undermined by the actions of management…..

April 25th, 2008

     With only the best intentions, the Sarbanes Oxley Act was enacted in 2002 as federal law in response to a number of high-profile accounting scandals that rocked the financial markets and individual investor trust.  The Act also established the formation of the PCAOB, or Public Company Accounting Oversight Board, which is entrusted to oversee, regulate, inspect, and discipline the work of accounting firms regarding public companies.  The Act also provides guidance on major other issues such as auditor independence, corporate governance, internal controls, as well as enhanced financial disclosures.

     With almost six years since the passing of SOX, the vast majority of public firms have moved well beyond the implementation, testing, and validation phase to now begin working on new major projects.  Further, I have been seeing a shift in the demand for new candidates softening in this area since most implementations are complete and internal audit departments are established.        So all of this must be fantastic for the individual investor and trust must certainly be building exponentially in the public markets?  Right?  Not necessarily……      Let’s take a look at one company, who’s management seems to have undermined the effectiveness of SOX through ineffective forecasting, poor communication, and inattention to key corporate performance indicators.  My company of choice for this analogy is Crocs, Inc. (CROX).

 

Read my full commentary in Undermining Sarbanes-Oxley .

 

 

 

 

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