September 25, 2018

JOBS Act Hasn’t Encouraged as Many Companies to Avoid Sarbanes-Oxley as Some Would Have Hoped

Before the House of Representatives got down with some Audit Integrity whatever whatever, we had the Jumpstarting Our Business Startups Act as an example of Congressional wading into the accounting/auditing regulatory waters. If you need a refresher, the JOBS Act flew through Congress and the got the President's signature last year despite a lot of people saying that it would result a lot of fraud.

One of the biggest sticking points was that the JOBS Act would grant exemptions from complying with Sarbanes-Oxley to "emerging growth companies." And since many people actually remember why Sarbanes-Oxley had to come about in the first place, it doesn't sit well with them because, you know, internal controls and stuff. It was a legit criticism then and we wrote a number of posts last year that demonstrated just how ill-prepared some of the companies filing under the JOBS Act were. 

But a funny thing happened on the way to all the jumpstarting of all those businesses — there's been very little jumpstarting, according to a study from BDO

According to a new study by BDO USA, LLP, one of the nation's leading accounting and consulting organizations, only 14 percent of capital markets executives at leading investment banks believe the JOBS Act is having a positive impact on increasing the number of IPOs on U.S. exchanges. A majority (58%) say it isn't positively impacting IPOs, while just over one-quarter (28%) believe it is still too early to evaluate the impact. Of those who don't believe it has had a positive impact or have yet to decide, more than two-thirds (68%) predict the law will never achieve its desired goal of increasing the number of businesses going public.
 
These latest findings represent a precipitous drop in the JOBS Act's perceived effectiveness from a year ago when a majority (55%) of I-bankers believed the JOBS Act would have a positive impact on U.S. IPO activity. Yet, by last winter, less than one-third (29%) of the capital markets community believed the new law had been effective in increasing the number of IPOs on U.S. exchanges and now that percentage has dropped even further.
If you're an anti-red tape type then it's probably disappointing that the Act hasn't had resulted in full-plus-infinity employment, but you might be relieved to know the shadier aspects are still quite popular:
When asked what provision of the JOBS Act has been most heavily utilized, excluding the confidential filing provision, 40 percent cite the ability to provide only two years of financials in the registration statement. Delayed compliance with public company accounting standards (25%) and the five-year SOX exemption (24%) were the other provisions cited by sizable proportions of the bankers. A much smaller proportion (9%) cited the ability to postpone disclosure of executive compensation.
Now, you could conclude that the savviest entrepreneurs/shiftiest criminals haven't quite figured out how to best navigate/exploit the JOBS Act because it's only been 15 fifteen months since it became law, but maybe that's a little too cynical. I'd entertain other theories.
 

Related articles

Fraud Risk, Staffing Reductions, and OJ Logic at CFO.com

orangejuice_Full.jpgEditor’s Note: Robert Stewart is a former Big 4 auditor and ex-Marine who has since served in several executive management roles in both Internal Audit and Corporate Finance. He is also the founder and chief contributor to the online accounting and audit community, The Accounting Nation. Outside of work, he is a husband, father, brother, writer,uate aspiring triathlete.
You can always count on CFO.com for logic flaws and surface reporting. It’s like drinking that concentrated orange juice in a can when you add three parts too much water and then put ice cubes in it because it’s warm, which makes it even more watery which… Where was I going with this?
Oh yeah. In one of their latest articles, entitled “As Internal Audit Staffs Shrink, Will Fraud Rise?“, the author portends — based on a Deloitte survey and subsequent interview — that the decrease in internal audit personnel somehow increases the risk of organizational exposure to fraud. What? Ever hear the phrase “Correlation is not Causation”? Symptom or cause.


Here’s my $0.02: such staffing reductions may increase the risk that fraud will go undetected (though only nominally given that IA only uncovers about 12% percent of frauds according to the ACFE’s Report to the Nation), but the risk to the organization more than likely remains constant, right? Am I missing something here?
After all, Internal Audit is a downstream event unless you make the argument that the organizational perception of being “watched” has diminished with the reductions in internal audit/compliance staffing, thus emboldening would-be fraudsters (i.e. strengthening the “opportunity” leg of Cressey’s Fraud Triangle). But this article doesn’t make that argument.
The article further states that:

Despite the reduction in compliance personnel, 50% of respondents to the Deloitte survey, who included CFOs, CEOs, board members, and middle managers in finance and risk management, said their compliance and ethics programs are strong. Another 36% said they are adequate. Many public companies and some private companies invested significantly in their compliance programs after the passage of Sarbox in 2002, notes Francis, and they may now feel confident that those programs are effective even with a reduced staff. But that confidence may not always be justified.

Confidence? I would hardly call the above percentages “confidence” on the part of the respondents. If I told you that 50% of the airline pilots felt that their pre-flight checklist procedures were strong, how would you feel about flying? No F*#$ing way I’m getting on that plane.
The words wrapped around the survey results and subsequent interview quotes don’t at all support the conclusion that this article is trying to draw. Perhaps it’s because the survey was designed and administered by a firm (Deloitte) that has a vested interest in drumming up some business through fear tactics? After all, you’re never going to hear a burglar alarm company extolling the improvements in public safety.
And you’re never going to hear a company that sells risk-related services conducting and publicly releasing results that don’t support their strategic objectives. Or perhaps it’s just bad writing at CFO.com in order to satisfy a quota? The World may never know (I think the World will be fine with this). Either way, I’ve wasted double the amount of time that I should have on this topic (i.e. read it and wrote about it). And so with that…I bid you adieu.

SHOCKER: New Study Says Work Interferes with Life

ilovemyjob.jpgWe realize this is hard to believe — especially during this time of year — but yes, it’s true!
According to the University of Toronto’s new survey of 1,800 American workers, 50% of those surveyed take work home on a regular basis. Not a surprising result since the authors asked questions that easily solidified the “Americans live to work” mantra:
• How often does your job interfere with your home or family life?
• How often does your job interfere with your social or leisure activities?
• How often do you think about things going on at work when you are not working?
Scott Schiemen, one of the authors of the study, informs us of the grim but dead on conclusions:

Schieman says, “Nearly half of the population reports that these situations occur ‘sometimes’ or ‘frequently,’ which is particularly concerning given that the negative health impacts of an imbalance between work life and private life are well-documented.”


The study’s core findings indicate some things that may sound familiar to you:

• People with college or postgraduate degrees tend to report their work interferes with their personal life more than those with a high school degree;
• Professionals tend to report their work interferes with their home life more than people in all other occupational categories;
• Several job-related demands predict more work seeping into the home life: interpersonal conflict at work, job insecurity, noxious environments, and high-pressure situations; however, having control over the pace of one’s own work diminishes the negative effects of high-pressure situations;
• Several job-related resources also predict more work interference with home life: job authority, job skill level, decision-making latitude, and personal earnings;
• As predicted, working long hours (50-plus per week) is associated with more work interference at home — surprisingly, however, that relationship is stronger among people who have some or full control over the timing of their work;

Again, shout if this sounds familiar. The sorry thing is that 50+ hours a week is considered “long hours.” Most of you can do 50 standing on your head. Plus, those of you that are eating hours are doing yourself an even greater disservice. But that’s a whole other discussion.
Maybe we should just own up to it? We love working! To hell with family, friends, hobbies, etc. We’ve got work to do!
When Work Interferes With Life [Science Daily]
More Work/Life Balance:
Moss Adams Values ‘A Balanced Life’ over ‘Accountability’
Is the Era of Work/Life Balance Over?
Jack Welch is Not Buying the Whole Work-Life Balance Thing