#sarbanes-oxley

[mostlysignssomeportents]

The long sleep of capitalism’s watchdogs

There are only five more days left in my Kickstarter for the audiobook of The Bezzle, the sequel to Red Team Blues, narrated by @wilwheaton! You can pre-order the audiobook and ebook, DRM free, as well as the hardcover, signed or unsigned. There's also bundles with Red Team Blues in ebook, audio or paperback.

One of the weirdest aspect of end-stage capitalism is the collapse of auditing, the lynchpin of investing. Auditors – independent professionals who sign off on a company's finances – are the only way that investors can be sure they're not handing their money over to failing businesses run by crooks.

It's just not feasible for investors to talk to supply-chain partners and retailers and verify that a company's orders and costs are real. Investors can't walk into a company's bank and demand to see their account histories. Auditors – who are paid by companies, but work for themselves – are how investors avoid shoveling money into Ponzi-pits.

Attentive readers will have noticed that there is an intrinsic tension in an arrangement where someone is paid by a company to certify its honesty. The company gets to decide who its auditors are, and those auditors are dependent on the company for future business. To manage this conflict of interest, auditors swear fealty to a professional code of ethics, and are themselves overseen by professional boards with the power to issue fines and ban cheaters.

Enter monopolization. Over the past 40 years, the US government conducted a failed experiment in allowing companies to form monopolies on the theory that these would be "efficient." From Boeing to Facebook, Cigna to InBev, Warner to Microsoft, it has been a catastrophe. The American corporate landscape is dominated by vast, crumbling, ghastly companies whose bad products and worse corporate conduct are locked in a race to see who can attain the most depraved enshittification quickest.

The accounting profession is no exception. A decades-long incestuous orgy of mergers and acquisitions yielded up an accounting sector dominated by just four firms: EY, KPMG, PWC and Deloitte (the last holdout from the alphabetsoupification of corporate identity). Virtually every major company relies on one of these companies for auditing, but that's only a small part of corporate America's relationship with these tottering behemoths. The real action comes from "consulting."

Each of the Big Four accounting firms is also a corporate consultancy. Some of those consulting services are the normal work of corporate consultants – cookie cutter advice to fire workers and reduce product quality, as well as supplying dangerously defecting enterprise software. But you can get that from the overpaid enablers at McKinsey or BCG. The advantage of contracting with a Big Four accounting firm for consulting is that they can help you commit finance fraud.

Remember: if you're an executive greenlighting fraud, you mostly just want to be sure it's not discovered until after you've pocketed your bonus and moved on. After all, the pro-monopoly experiment was also an experiment in tolerating corporate crime. Executives who cheat their investors, workers and suppliers typically generate fines for their companies, while escaping any personal liability.

By buying your cheating advice from the same company that is paid to certify that you're not cheating, you greatly improve your chances of avoiding detection until you've blown town.

Which brings me to the idea of the "bezzle." This is John Kenneth Galbraith's term for "the weeks, months, or years that elapse between the commission of the crime and its discovery." This is the period in which both the criminal and the victim feel like they're better off. The crook has the victim's money, and the victim doesn't know it. The Bezzle is that interval when you're still assuming that FTX isn't lying to you about the crazy returns they're generating for your crypto. It's the period between you getting the shrinkwrapped box with a 90% discounted PS5 in it from a guy in an alley, and getting home and discovering that it's full of bricks and styrofoam.

Big Accounting is a factory for producing bezzles at scale. The game is rigged, and they are the riggers. When banks fail and need a public bailout, chances are those banks were recently certified as healthy by one of the Big Four, whose audited bank financials failed 800 re-audits between 2009-17:

https://pluralistic.net/2020/09/28/cyberwar-tactics/#aligned-incentives

The Big Four dispute this, of course. They claim to be models of probity, adhering to the strictest possible ethical standards. This would be a lot easier to believe if KPMG hadn't been caught bribing its regulators to help its staff cheat on ethics exams:

https://www.nysscpa.org/news/publications/the-trusted-professional/article/sec-probe-finds-kpmg-auditors-cheating-on-training-exams-061819

Likewise, it would be easier to believe if their consulting arms didn't keep getting caught advising their clients on how to cheat their auditing arms:

https://pluralistic.net/2023/05/09/dingo-babysitter/#maybe-the-dingos-ate-your-nan

Big Accounting is a very weird phenomenon, even by the standards of End-Stage Capitalism. It's an organized system of millionaire-on-billionaire violence, a rare instance of the very richest people getting scammed the hardest:

https://pluralistic.net/2021/06/04/aaronsw/#crooked-ref

The collapse of accounting is such an ominous and fractally weird phenomenon, it inspired me to write a series of hard-boiled forensic accountancy novels about a two-fisted auditor named Martin Hench, starting with last year's Red Team Blues (out in paperback next week!):

https://us.macmillan.com/books/9781250865854/redteamblues

The sequel to Red Team Blues is called (what else?) The Bezzle, and part of its ice-cold revenge plot involves a disillusioned EY auditor who can't bear to be part of the scam any longer:

https://www.kickstarter.com/projects/doctorow/the-bezzle-a-martin-hench-audiobook-amazon-wont-sell

The Hench stories span a 40-year period, and are a chronicle of decades of corporate decay. Accountancy is the perfect lens for understanding our modern fraud economy. After all, it was crooked accountants who gave us the S&L crisis:

https://scholarworks.umt.edu/cgi/viewcontent.cgi?article=10130&context=etd

Crooked auditors were at the center of the Great Financial Crisis, too:

https://francinemckenna.com/2009/12/07/they-werent-there-auditors-and-the-financial-crisis/

And of course, crooked auditors were behind the Enron fraud, a rare instance in which a fraud triggered a serious attempt to prevent future crimes, including the destruction of accounting giant Arthur Andersen. After Enron, Congress passed Sarbanes-Oxley (SOX), which created a new oversight board called the Public Company Accounting Oversight Board (PCAOB).

The PCAOB is a watchdog for watchdogs, charged with auditing the auditors and punishing the incompetent and corrupt among them. Writing for The American Prospect and the Revolving Door Project, Timi Iwayemi describes the long-running failure of the PCAOB to do its job:

https://prospect.org/power/2024-01-26-corporate-self-oversight/

For example: from 2003-2019, the PCAOB undertook only 18 enforcement cases – even though the PCAOB also detected more than 800 "seriously defective audits" by the Big Four. And those 18 cases were purely ornamental: the PCAOB issued a mere $6.5m in fines for all 18, even though they could have fined the accounting companies $1.6 billion:

https://www.pogo.org/investigations/how-an-agency-youve-never-heard-of-is-leaving-the-economy-at-risk

Few people are better on this subject than the investigative journalist Francine McKenna, who has just co-authored a major paper on the PCAOB:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4227295

The paper uses a new data set – documents disclosed in a 2019 criminal trial – to identify the structural forces that cause the PCAOB to be such a weak watchdog whose employees didn't merely fail to do their jobs, but actually criminally abetted the misdeeds of the companies they were supposed to be keeping honest.

They put the blame – indirectly – on the SEC. The PCAOB has three missions: protecting investors, keeping markets running smoothly, and ensuring that businesses can raise capital. These missions come into conflict. For example, declaring one of the Big Four auditors ineligible would throw markets into chaos, removing a quarter of the auditing capacity that all public firms rely on. The Big Four are the auditors for 99.7% of the S&P 500, and certify the books for the majority of all listed companies:

https://blog.auditanalytics.com/audit-fee-trends-of-sp-500/

For the first two decades of the PCAOB's existence, the SEC insisted that conflicts be resolved in ways that let the auditing firms commit fraud, because the alternative would be bad for the market.

So: rather than cultivating an adversarial relationship to the Big Four, the PCAOB effectively merged with them. Two of its board seats are reserved for accountants, and those two seats have been occupied by Big Four veterans almost without exception:

https://www.pogo.org/investigations/captured-financial-regulator-at-risk

It was no better on the SEC side. The Office of the Chief Accountant is the SEC's overseer for the PCAOB, and it, too, has operated with a revolving door between the Big Four and their watchdog (indeed, the Chief Accountant is the watchdog for the watchdog for the watchdogs!). Meanwhile, staffers from the Office of the Chief Accountant routinely rotated out of government service and into the Big Four.

This corrupt arrangement reached a crescendo in 2019, with the appointment of William Duhnke – formerly of Senator Richard Shelby's [R-AL] staff – took over as Chief Accountant. Under Duhnke's leadership, the already-toothless watchdog was first neutered, then euthanized. Duhnke fired all four heads of the PCAOB's main division and then left their seats vacant for 18 months. He slashed the agency's budget, "weakened inspection requirements and auditor independence policies, and disregarded obligations to hold Board meetings and publicize its agenda."

All that ended in 2021, when SEC chair Gary Gensler fired Duhnke and replaced him with Erica Williams, at the insistence of Bernie Sanders and Elizabeth Warren. Within a year, Williams had issued 42 enforcement actions, the largest number since 2017, levying over $11m in sanctions:

https://www.dlapiper.com/en/insights/publications/2023/01/pcaob-sets-aggressive-agenda-for-2023-what-to-expect-as-agency-enforcement-expands

She was just getting warmed up: last year, PCAOB collected $20m in fines, with five cases seeing fines in excess of $2m each, a record:

https://www.dlapiper.com/en/insights/publications/2024/01/pcaobs-enforcement-and-standard-setting-rev-up-what-to-expect-in-2024

Williams isn't shy about condemning the Big Four, publicly sounding the alarm that 40% of the 2022 audits the PCAOB reviewed were deficient, up from 34% in 2021 and 29% in 2020:

https://www.wsj.com/articles/we-audit-the-auditors-and-we-found-trouble-accountability-capital-markets-c5587f05

Under Williams, the PCAOB has enacted new, muscular rules on lead auditors' duties, and they're now consulting on a rule that will make audit inspections much faster, shortening the documentation period from 45 days to 14:

https://tax.thomsonreuters.com/news/pcaob-rulemaking-could-lead-to-more-timely-issuance-of-audit-inspection-reports/

Williams is no fire-breathing leftist. She's an alum of the SEC and a BigLaw firm, creating modest, obvious technical improvements to a key system that capitalism requires for its orderly functioning. Moreover, she is competent, able to craft regulations that are effective and enforceable. This has been a motif within the Biden administration:

https://pluralistic.net/2022/10/18/administrative-competence/#i-know-stuff

But though these improvements are decidedly moderate, they are grounded in a truly radical break from business-as-usual in the age of monopoly auditors. It's a transition from self-regulation to regulation. As @40_Years on Twitter so aptly put it: "Self regulation is to regulation as self-importance is to importance":

https://twitter.com/40_Years/status/1750025605465178260

Berliners: Otherland has added a second date (Jan 28 - THIS SUNDAY!) for my book-talk after the first one sold out - book now!

If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2024/01/26/noclar-war/#millionaire-on-billionaire-violence

Back the Kickstarter for the audiobook of The Bezzle here!

Image: Sam Valadi (modified) https://www.flickr.com/photos/132084522@N05/17086570218/

Disco Dan (modified)

https://www.flickr.com/photos/danhogbenspics/8318883471/

CC BY 2.0: https://creativecommons.org/licenses/by/2.0/

#pluralistic #big accounting #auditing #marty hench #martin hench #big four accountants #management consultants #corruption #millionaire on billionaire violence #long cons #the bezzle #conflicts of interest #revolving door #self-regulation #gaap #sox #sarbanes-oxley #too big to fail #too big to jail #audits #defective audits #Public Company Accounting Oversight Board #pcaob #sec #scholarship #Francine McKenna #William Duhnke #administrative competence #photocopier kickers #NOCLARs

[childoferebus]

WHOMST

#bless u anon for my crabs again but also #?????? #who the fuck am I #I'm just sitting here reblogging memes and shit #and having a minor stress out about having to go back to school tomorrow #I rarely even post my own stuff I'm ?????? #all I can offer you is questionabl works of fiction and pictures of my aquarium #which is currently going through some shit #my shrimp were NOT HAPPY about the sudden removal of their java moss #or the inclusion of their new java fern and amazon sword #but my guppies are pretty sure this is the greatest thing that's ever happened to them #so I guess there's that #their names are Embezzlement and Tax Fraud in case you were wondering #who are taking up the throne from the Sarbanes Oxley Act of 2002 (who was a betta) #you gave me crabs so now you have to hear about my aquarium I guess #even though my plans of getting thai micro crabs have been temporarily thwarted #I'll keep you updated on how long I keep the crabs this time #the record may very well be 10 days

[asmolbirb]

Yo I had an admin at work today mention Sarbanes-Oxley in real actual life and all I could think was “ajdkakdlalfls like Suits??”

#suits tv #neko rambles #sarbanes oxley #i left my body for a brief moment fr #work woes

[tototavros]

Fischer, the Jan 6. "obstructing an official proceeding" case from Sarbanes-Oxley, is interesting as a documentation of American Supreme Court Justice demeanor in "politicized" cases (how they become "politicized" instead of normal, idk), very strange to see Sotomayor whacking the defendants counsel for poor arguments while Alito stayed silentish.

#backstop #notably Jackson seems like she might be consistent on lenity? #theres a way to obliterate defense by just saying superfluity isnt a limiting construction on Sarbanes Oxley #because its fundamentally a act to prevent general corruption going unpunished #but that runs into the hypertextualist arguments of the other types lf #corruption cases

[knovos]

#CLM for SOX Compliance #Contract Lifecycle Management #Corporate Compliance #Sarbanes-Oxley Act #Corporate Fraud #SOX #SOX Act #SOX Compliance

[illumeo]

https://www.illumeo.com/courses/segregation-duties-core-business-processes

'Segregation of Duties' (SOD) within essential business processes, a linchpin for risk management and regulatory compliance, notably Sarbanes-Oxley (SOX). SOD ensures robust internal controls by delineating distinct roles to mitigate conflicts of interest. It elucidates SOD principles, dissects specific process intricacies, and empowers participants to pinpoint vulnerabilities, enact effective SOD strategies, and comprehend control mechanisms. By mastering SOD, individuals fortify organizations against financial improprieties and regulatory breaches, safeguarding integrity and compliance.

#e-learning #enhancement #finance #certification #accounting #business #courses #Segregation of Duties #Risk Management #Regulatory Compliance #Sarbanes-Oxley (SOX) #Internal Controls #Conflict Mitigation #Financial Integrity #Compliance Strategies #Role Delineation #Control Mechanisms

[smith1234]

As This Web Timestamping & Smart Contracts Hera soft company?

Timestamping digital documents have been around for decades though never more than since the start of the 2020 pandemic. As the demand has increased over the years so has the desire for trusted and secure certification of data. We live in a digital world with companies making the shift from office buildings to remote and hybrid work environments. Consumers have opted to eliminate paper and elect digital options for their personal banking, access of medical records, completion of legal documents and more. This continued digital distributed cloud computing evolution makes the need for secure time stamping and smart contracts not only highly desired but necessary.

Smart Contracts

Smart contracts are a safe solution to our digital identity needs. Typically used with the support of block chain technology, smart contracts automate the execution of an agreement or exchange of values between parties without loss of time or intermediary involvement. Smart contracts are far more efficient than traditional contracts and have a higher level of security, making them the perfect solution for any data, including financial records and transactions, legal files, and medical data. Smart contract applications are currently most popular in the real estate, healthcare, investment, and lending industries. Smart contracts are transparent, traceable, and irreversible.

Supply chains utilize secure timestamping to track the location, delivery date and time, regulate price, and optimize quality control of products and goods. Timestamps are used in digital media as well for use in PDF documents, spreadsheets, drawings, photos, artwork, literature and books, music, and more.

#Logistics Security #gamification cyber security #Enterprise Security solutions #Blockchain User Management Solutions #HIPAA #the Sarbanes-Oxley Act #Family Educational Rights and Privacy Act #NIST guidelines #developers & startups

[nationallawreview]

SEC Commissioner Signals Need to Fulfill Mandate of Sarbanes-Oxley Act and Develop “Minimum Standards” for Lawyers Practicing Before the Commission

SEC Commissioner Signals Need to Fulfill Mandate of Sarbanes-Oxley Act and Develop “Minimum Standards” for Lawyers Practicing Before the Commission

In remarks on March 5, 2022, on PLI’s Corporate Governance webcast, Commissioner Allison Herren Lee of the Securities and Exchange Commission stated that 20 years after its enactment, it is time to revisit the “unfulfilled mandate” of Section 307 of the Sarbanes-Oxley Act of 2002 and establish minimum standards for lawyers practicing before the Commission.1  Commissioner Lee, who announced that…

View On WordPress

#Allison Herren Lee #attorney client privilege #attorneys #capital markets #Finance Law #financial markets #PLI’s Corporate Governance webcast #Sarbanes-Oxley Act #SEC #SEC Commissioner #Securities Exchange Commission #Securities Law #securities lawyers

[machtaholic]

I keep hearing about Sarbanes Oxley this morning and all I can think of is Mike Ross and Harvey Specter lol

#suitsusa #mike ross #harvey specter #mike x harvey

[mybigfatgaylife]

tl;dr SCOTUS has before it a case for another insurrectionist who is challenging the use of Sarbanes-Oxley to prosecute him. If SCOTUS finds in favor of this defendant, it will invalidate similar charges against any of the insurrectionists, including Trump. The case doesn't mention Trump at all, so this is how SCOTUS will fix many of Trump's problems and still be able to say "we didn't do it for him."

#calling it now

[victoriabyrnearth101]

My favorite animal when I was a child was a duck. My dad and I used to go for early morning runs on the Erie Canal and pass by ducks in the morning sleeping or just waking up. I love them because they are cute and just mind their own business unlike geese which will chase you if you come anywhere near them. Something I found out about ducks is that they cannot feel cold in their feet because they have no nerves or blood vessels in their feet.

During the fall for some reason I am always in the mood to listen to American Authors. When I played travel softball in middle school and high school, my mom and I would listen to their album “Oh, What a Life” on our way to my tournaments. For some reason, that album always reminds me of fall. My favorite fall movie is the Thanksgiving Charlie Brown movie. I am a big fan of horror movies, but overall that is my favorite fall themed movie. I love Linus dispensing his wisdom on everybody, Peppermint Patty making Charlie play football, and Snoopy and Woodstock trying to cook the meal. It just puts me in the fall mood!

The Sarbanes-Oxley Act was established in 2002, the year I was born. This is a very important act for businesses as it aimed to make financial statements more accurate and reduce fraud. It increased the standards for companies as the company leaders now are required to sign off on their financial statements, making them personally responsible if there is any material misstatement. This came about because of mostly the Enron scandal where the company was knee deep in fraudulent activities, as well as some other large companies that were doing similar activities. I found this interesting because this comes up a lot as an accounting Major, and these big accounting standards came into place the year I was born.

The song “You are my Sunshine” (the Norman Blake version) was my favorite song as a child. I absolutely loved this song and still do. I made my parents play it on repeat during car rides until they became sick of it. It really is a sad song, but I have always loved it. The lyrics “you make me happy when skies are grey, you’ll never know dear how much I love you” always made me feel comforted, even though it is a song about a man’s wife leaving him for another man. It is a song about unconditional love as the man is pleading to his wife to come home and he will spend the rest of his life trying to make her happy and love him. As a child I saw it as a happy and sweet song, and even though I now know it’s meaning, it still resonated with me in the same way when I hear it. To me it means unconditional love and not giving up on someone.

Attendance Prompt:

“Gold has always been the color of reverence and revered itself. Part of its allure lies in the mineral’s scarcity and uneven distribution. Although mines have been discovered all over the world, gold rushes mean that they are quickly exhausted and abandoned in favor of those that have been newly uncovered.” (Page 85, The Secret Lives of Color)

I chose this quote because it reminded me of the Taylor Swift song “Gold Rush”. It is one of my favorites of her songs because it relates to this concept of people flocking madly to something desired. The song is about a guy that all the girls are in love with, which is like how people treat gold. They see or hear that there is gold and they rush to make it theirs. The scarcity factor of gold also reminds me of the economic idea of scarcity. In economics we face scarcity of resources, money and time, so gold reminded me of that and how the limited supply of it makes it a good form of money.

#Youtube

[fullsunstrawberry]

girl you don’t even know how much i’m loving this story like it’s so good!!! also good job for your ores in accounting 🩷🩷

Honesty this is my favorite of my writing so far, i just love posting it

it was a presentation on Sarbanes Oxley act basically because a bunch of major companies got screwed over lol.. boringgg

#my love #ask answered #i hate accounting #and presenting shit #erin-calling <3

[bighermie]

[capitalism-and-analytics]

Back in the mid 1970’s (gasp!) was considered to be easier than Physics, Economics, Engineering, Mathematics or Computer Science. So I was an Accounting/Business Administration major. Just saying.

Doesn't surprise me at all, the field has changed quite a bit over the decades; most notably due to the implementation of significant regulation (i.e. Sarbanes Oxley), innovation of technology, and growth in globalism (i.e. offshoring).

[ashyushblogs]

Unlock the Secrets of Corporate Governance: Sarbanes-Oxley & ISO 9001 Mastery 

Discover the keys to effective corporate governance with the "Sarbanes-Oxley & ISO 9001: Mastering Corporate Governance" course, now available at 100% off on Udemy! 

In this comprehensive course, you'll delve into the principles and practices of corporate governance, including the Sarbanes-Oxley Act and ISO 9001 standards. Whether you're a business professional, auditor, or compliance officer, this course equips you with the knowledge and skills needed to navigate the complexities of corporate governance with confidence. 

From risk management and internal controls to compliance frameworks and quality management systems, you'll learn how to ensure transparency, accountability, and ethical conduct within your organization. 

Don't miss this opportunity to master corporate governance—for free! 

Enroll now: https://www.korshub.com/courses/sarbanes-oxley-iso-9001-mastering-corporate-governance-udemy 

#CorporateGovernance #SarbanesOxley #ISO9001 #Compliance #RiskManagement #FreeLearning #UdemyCouponCode #UdemyFreeCoupons #Udemy

[aven-data]

Compliance and Regulatory Considerations in Archive Legacy Systems

Introduction

In the realm of data management, compliance and regulatory requirements play a pivotal role in shaping how organizations archive legacy systems data. The preservation and governance of historical data must adhere to various laws, regulations, and industry standards to ensure legality, security, and ethical standards are upheld. Here, we delve into the critical considerations surrounding compliance and regulatory compliance in archive legacy systems.

Understanding Regulatory Landscape

Navigating the regulatory landscape is essential for organizations tasked with archiving legacy systems data. Depending on the industry, region, and type of data being archived, there may be a myriad of regulations to adhere to, such as GDPR, HIPAA, Sarbanes-Oxley, and more. Each regulation outlines specific requirements for data retention, security, privacy, and disclosure, which must be integrated into the archive legacy systems strategy.

Data Privacy and Protection

Data privacy and protection are paramount concerns when archiving legacy systems data. Organizations must ensure that sensitive information, such as personally identifiable information (PII) and financial data, is securely stored and accessed only by authorized personnel. Compliance with data protection regulations often requires implementing encryption, access controls, anonymization techniques, and regular audits to safeguard archived data from unauthorized access or breaches.

Retention and Destruction Policies

Establishing clear retention and destruction policies is essential for managing archive legacy systems data in compliance with regulatory requirements. Organizations must determine the appropriate retention periods for different types of data based on legal, operational, and business considerations. Additionally, implementing secure data destruction procedures ensures that data is disposed of properly when it is no longer needed, minimizing the risk of data breaches or non-compliance.

Auditability and Documentation

Maintaining auditability and documentation is key to demonstrating compliance with regulatory requirements regarding archive legacy systems data. Organizations should keep comprehensive records of data archiving processes, including data sources, retention periods, access logs, and any modifications or deletions made to archived data. These records serve as evidence of compliance during regulatory audits or investigations and help mitigate legal risks associated with non-compliance.

Conclusion

Compliance and regulatory compliance are integral components of archive legacy systems management, ensuring that organizations adhere to legal, ethical, and industry standards when preserving historical data. By understanding the regulatory landscape, implementing robust data privacy and protection measures, establishing retention and destruction policies, and maintaining auditability and documentation, organizations can navigate the complexities of compliance in archive legacy systems effectively. By prioritizing compliance efforts, organizations can mitigate risks, safeguard sensitive information, and maintain trust with stakeholders while leveraging the value of their legacy data assets.