The new legislation has arisen after accounting scandals at companies such as Enron and WorldCom Inc. shook investor confidence.
The flood of new rules has given way to the creation of new enterprises from companies ranging from accounting and law firms to technology and public relations businesses. Some people jokingly call Sarbanes-Oxley the Full-Employment Act for Lawyers and Accountants.
It has resulted in new opportunities for law and accounting firms whose Bull Market businesses, such as assisting with initial public stock offerings, have foundered as the economy has softened.
The national law firm Foley & Lardner estimates that the new reforms will increase “the cost of being public” by 90.4 percent for middle-market companies. It estimates that accounting fees will rise 105.3 percent and the cost of compliance personnel will rise 266.7 percent.
“It has created a great opportunity for a lot of different companies. No question,” says Thomas J. Schiro, deputy national managing partner of assurance services for the Big Four accounting firm Deloitte & Touche in Manhattan. He is also the head of the firm’s national corporate governance service line, which was begun before the Enron debacle but has expanded since then.
Schiro says many companies, especially ones without extensive in-house legal teams, are seeking help to implement Sarbanes-Oxley’s myriad of regulations, ranging from executives signing off on financial statements to companies not using the same firm for accounting and auditing.
Last month, the SEC delayed the deadline for companies to start implementing one of the rules, which requires businesses to include in each annual report a discussion of how they are overseeing internal controls.
“I believe the SEC has now realized and companies are really realizing what a daunting task it is to implement all the rules of Sarbanes-Oxley,” Schiro says.
Schiro says Deloitte’s corporate governance practice has received more business from both existing and new clients. “It’s been pretty exciting here actually, at a time when a lot of our other businesses have been slowing down,” Schiro says.
Public relations firm Fleischman-Hillard recently started a new practice to help companies plan their compliance strategy and effectively communicate that strategy both to employees and external parties, including shareholders and the media.