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Fixing the Enron fix

Fixing the Enron fix

by Rick Turoczy on March 11, 2006

One problem with the new accounting regulations created under the 2002 Sarbanes-Oxley law is that they treat all companies the same, from General Motors to Just Getting Off the Ground Inc. Under the law, all publicly traded companies must have an independent auditor review their internal controls over financial reports. That’s supposed to ensure that companies can’t hide massive losses or pay crooked executives millions of dollars off the books.

But studies estimate that the extra costs for smaller firms to comply with the rules can run as high as $1 million a year. That can mean not hiring a new employee or scrapping the launch of a new product. For the last two years, companies worth $75 million or less have been given a temporary exemption from the requirements, but that is set to expire next year.

Fixing the Enron fix

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