"Sarbox vs. Small Businesses" and "Beware of Extremist Rhetoric"

Drew Conrad: In 2002, on the heels of some of the most outrageous scandals to rock corporate America, President Bush signed the Sarbanes-Oxley Act of 2002, also known as the Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbox).  Sarbox was designed to impede future Enrons and WorldComs from coming to pass.  Additionally, the law created the Public Company Accounting Oversight Board (PCAOB).  The PCAOB is run by five members who, rather than being appointed by the President like every other government entity, are appointed by the five commissioners of the Securities and Exchange Commission "to provide independent oversight of public accounting firms providing audit services (auditors). It also creates a central oversight board tasked with registering auditors, defining the specific processes and procedures for compliance audits, inspecting and policing conduct and quality control, and enforcing compliance with the specific mandates of Sarbox."  While the law does go to great lengths to protect investors and hold accountants, auditors, and executives responsible, Sarbox creates standards so high that often times, small entrepreneurial auditors and accountants are dealt crushing blows

Brad Beckstead is the managing partner at the audit firm Beckstead & Watts in Henderson, Nevada.  It is his lawsuit against PCAOB that has made the loudest noise against this small business killing law.  Wrote Beckstead in the September 2006 issue of Accounting Today, "Lost in the hotly debated issues surrounding the landmark Sarbanes-Oxley Act of 2002 are the unforeseen consequences impacting the accounting industry itself. Foremost among these is the creation of an inhibited marketplace that primarily benefits the Big Four accounting firms at the expense of their smaller, regional, and often more flexible counterparts."  

Beckstead continued, "Largely because of Sarbox, the Big Four now collectively audit 80 percent of all U.S. public companies. Under Sarbox, the PCAOB was established and set out to define and enforce a set of rules covering standards for all auditors of public companies. These standards are wholly inappropriate for smaller, entrepreneurial public companies and the small auditors that can most affordably and efficiently serve them. The PCAOB's standards practically wrote the Big Four into the rules, establishing what the U.S. Government Accountability Office has labeled an oligopoly."

In the Wall Street Journal, Kenneth Starr and Viet Dinh wrote, "A Brookings-American Enterprise Institute study found that all of Sarbanes-Oxley's provisions - mostly enforced by the PCAOB - have cost the U.S. economy more than $1 trillion in direct and indirect costs. And Democrats and Republicans have expressed dismay at the increased costs of smaller companies going public - especially at a time when growth capital is so hard to come by through the debt markets. Sen. John Kerry, D-Mass., for instance, has called for a task force to "make it easier for small businesses to comply with the Sarbanes-Oxley by reducing their regulatory burden."

On Monday, December 7, 2009, the Supreme Court of the United States will hear oral arguments in the case of the Free Enterprise Fund and Beckstead & Watts vs. PCAOB.  Lawyers with the Free Enterprise Fund will, in the words of Starr and Dinh, argue that "in writing the 2002 law, Congress created a striking Constitutional anomaly - a powerful executive branch agency with a structure that gives the President almost no say over its policies. With minimal oversight and no real supervision, the PCAOB decides which accounting firms to inspect and how to conduct an investigation."  Moreover, "The constitutional flaws in the PCAOB statute are not matters of mere etiquette or protocol," Judge Brett Kavanaugh of the federal appeals court of the District of Columbia wrote last summer. "By restricting the President's authority over the board, the act renders this Executive Branch agency unaccountable and divorced from Presidential control to a degree not previously not previously countenanced in our constitutional structure."

For the sake of the free market and small businesses in Utah and around the country, I hope that our nation's highest court favors the little guy.  Yes, the Enron and WorldCom scandals proved that some corporate reform was necessary, but reform should not come at the expense of the American entrepreneurial spirit.


Drew Conrad is a marketing major at the University of Utah, where he also serves as the Chairman of the U College Republicans.  Drew has a diverse P.R. background working with non-profit organizations, businesses, and campaigns.  He has lived in Colorado, Paraguay, Washington, D.C. and currently resides in Salt Lake City, Utah.

Tayler Clough and Sarah Day: Debate and certainly its political factions have long been important to American ideology and governance.  Few can argue that a conservative and liberal sentiment will always be present in United States policy and imagining complete moderation is a naivety conceived by the uninformed.  Informed decisions and those made for us by the sensational left or right have become increasingly harder to separate.  What effects is this leaving not only in national policy but those laws executed by our own State?  To better understand how this kind of media in masses operates and why it is so appealing with so many Utah citizens we must first look at its national application.

Three years ago John Stewart appeared on a show called Crossfire, he discussed with Paul Begala and Tucker Carlson about their obligation to broadcast responsible media. He began by saying,
    
"I made a special effort to come on the show today, because I have privately, amongst my friends and also in occasional newspapers and television shows, mentioned this show as being bad. And I wanted to -- I felt that that wasn't fair and I should come here and tell you that I don't -- it's not so much that it's bad, as it's hurting America. But I wanted to come here today and say... Stop, stop, stop, stop hurting America."

While many may consider John Stewart as part of the opinionated left, his point regarding the extremity of Cross Fire is not without its validity. Even though Crossfire is no longer on the air, the recurring sentiments of extreme rhetoric have lingered on especially in the form of theatrical radio shows, listened to extensively by citizens across the nation. In fact, with over 8 million listeners on over 400 radio stations, much of the nation has made the dramatic discussions hosted by radical demagogues such as Glenn Beck part of their everyday routine. (1) 

Whether or not radio ‘Czars' like Glenn Beck or Keith Olbermann have something worth saying, it is their approach that is unnerving.  Hyperbolic language of any kind is unnerving, but when you get 70,000 people protesting with signs that read ‘Get the ‘Czarist Commies Out' or ‘Madame Speaker Kiss Our Astroturf' it is reasonable to wonder just how beneficial these kind of programs really are.  Utah has certainly not dodged the ‘radical' bullet as thousands of Glennites tune in every day to listen to the comforting agitation that plays into whatever misguided fears may be manifest. 

In a state that has a Citizen's congress (the only one of two in the nation) whose entire purpose is to secure money and benefits for lower income families (2), it is astounding how many dedicated Utah Glennites tune in every day for a fresh dose of basic libertarianism.  It is not however, just middle-aged listeners in minivans giving foundation to the radical left and right but local and state legislators that reiterate these sentiments in emotional bills such as the HB-241.

At the risk of sounding prescriptive, it is certain that the sensational brilliance of the left and right must be countered by the patient rationality of the moderate.  In policy we must question anything other than the practical, and beware of listening to anything other than the source.  In short, local policy and representative governance requires us to make up our own minds, using political facts rather than political fiction to reach a comprehensive conclusion.

Tayler Clough is a Senior at the University of Utah; he is majoring in Political Science and History. He is currently serving as Student Body President of the Associated Students of the University of Utah. He plans to graduate this spring and hopes to move to Britain to work on a Masters Degree.  

Sarah Day is a student at the University of Utah majoring in
Environmental Studies and Political Science. She is minoring in
Business and Campaign Management. She currently serves as the President
of the College Democrats for the Sate of Utah. She will graduate in
thespring of 2011, and hopes to go on to earn a Masters of Public
Policy with an emphasis on environmental issues.   

1 Von Drehle, David, Scherer, Michael, ‘The Agitator' Time vol. 174, no. 12 (9/28/2009).

2 Alan Rabinowitz, Social Change: Philanthropy in America, (Westport: Quorum Books) p. 160.