Tuesday, June 8, 2010

Defending Small Business & The Constitution

Peekaboo! I See You…Acting Unconstitutionally
During the next two weeks, the Supreme Court will rule on a case that, if decided correctly, will bring relief to small businesses all over the nation. The details of the case sound arcane, but they get to the heart of how America is governed and what the Founders intended. Should the Justices uphold a challenge to the constitutionality of the Public Company Accounting Oversight Board (PCAOB, often pronounced "Peekaboo"), then entrepreneurs, the Constitution, and the rule of law will win. The losers? Beancounters and bureaucrats.

Facing public anger after the demise of Enron, Congress rushed to pass the Sarbanes-Oxley Act (known as Sarbox), which imposed a ton of new paperwork on businesses in the name of preventing another Enron-like scandal and subsequent bankruptcy. Ironically, many of the new requirements were already present at Enron, and the main beneficiaries of Sarbox were the Big Five accounting firms.

To oversee this huge exercise in ineffective check-box regulation, Sarbanes-Oxley set up a new bureaucracy, the PCAOB. Peekaboo has vast powers, including the ability to fine companies up to $2 million for even inadvertent breaches of its rules, which can go into absurd detail. Auditors must, for example, rule on which low-level employees have access to computer passwords.

Peekaboo's clunking fist has fallen the most heavily on small businesses, which find compliance harder. Big businesses, which are the big accounting firms' main clients, are able to absorb the large cost of the accounting requirements. Small accounting firms that specialized in helping small clients are unable to cope with the workload and are going out of business. A University of Rochester researcher has calculated that Sarbox has hammered the economy with over $1.4 trillion in direct and indirect costs.
There's more. Read the whole article by my husband and published in The American Spectator to learn how this stupid regulation, the PCAOB, "has been a little-noticed exacerbating factor in the current recession."

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