A news release from Chicago-based accounting firm Grant Thornton LLP said fear of shareholder litigation has also helped make many reluctant to agree to serve on a public company corporate board.
“Sarbanes-Oxley was a needed watershed event in corporate governance, but along with the greater protection of investors, there are increased time requirements for directors,” said Ed Nusbaum, Grant Thornton LLP chief executive officer, in the news release. “But an even greater obstacle is the fear of litigation.”
The increased possibility of facing a corporate liability action apparently is largely in the public sector however – not surprising since most privately held companies don’t face the regulatory oversight that their publicly held counterparts do from Sarbanes-Oxley and other regulations.
Some 78% of those from privately held companies haven’t found director recruiting to be a problem, according to the survey.
Responding senior financial executives had a pretty clear idea of what measures would help companies operate as efficiently as possible in the SOX era. Almost eight in 10 believe greater transparency in financial reporting and a comprehensive revenue-recognition statement are necessary. As for the need for a comprehensive revenue-recognition statement, seven of eight from public companies support such a set of comprehensive guidelines for how and when companies should report revenue.
Other findings include:
- 85% of the CFOs favor uniform global accounting standards
- 89% support adoption of a principles-based approach to accounting standards
- 79% think the current reporting model needs to be updated
- 77% believe that there is too great a concentration of public audits by the Big Four accounting firms, which audit 97% of public company revenues
- 76% agree stock options should be expensed
- 74% consider it appropriate for an accounting firm to do both audit and tax work for a company
- 63% see a “realistic chance” that one of the Big Four firms could fail within the next three years, and if it that happens, 78% don’t think the other three firms could adequately handle the business
The survey was conducted by the Center for Strategy, Execution and Valuation at DePaul University’s Kellstadt Graduate School of Business. The Senior Financial Executive Survey of Current Issues in Financial Reporting was commissioned by Grant Thornton LLP. Survey questionnaires were e-mailed to chief financial officers, controllers and treasurers from public and private companies across the United States, with revenues ranging from less than $100 million to more than $2 billion. The Web-based survey was conducted from May 18 and May 27, 2004, with senior financial executives of 101 companies responding.