US markets need accountability — it would be a mistake to dismantle Sarbanes-Oxley

The Hill

06-06-2025

Recently, the House Financial Services Committee approved a proposal to dissolve the Public Company Accounting Oversight Board, which supervises audits of publicly listed companies, and transfer its responsibilities to the Securities and Exchange Commission.
In times of economic uncertainty, the strength and integrity of our financial systems become even more crucial. Regardless of the outcome with the board, it would be a mistake to eliminate the broader Sarbanes-Oxley framework that has served as a foundation for market integrity since 2002. Dismantling these guardrails would increase the risk of financial reporting fraud that could trigger a crisis of confidence among investors and increased market volatility, putting trillions of dollars in market value and retirement savings at risk.
The bipartisan Sarbanes-Oxley Act was enacted in 2002 in the wake of a number of accounting scandals, most prominently Enron and WorldCom, which wiped out billions in market value and retirement savings. It passed with overwhelming support in both houses, reflecting the urgency lawmakers felt to address the crisis threatening our capital markets.
At its core, Sarbanes-Oxley established crucial guardrails. Section 404 requires companies to maintain robust internal controls over financial reporting, while Section 302 mandates that CEOs and CFOs personally certify the accuracy of financial statements. These provisions ensure that those who lead corporations are accountable for the integrity of their financial disclosures.
Sarbanes-Oxley also established independent oversight of auditors responsible for verifying financial statements. This provided essential third-party assurance that investors could trust what companies report — a crucial element in rebuilding market confidence.
Critics of Sarbanes-Oxley complain that compliance costs are a burden on businesses. While initial implementation was indeed expensive, companies have since learned to leverage technology and risk-based approaches to streamline the process. Research from firms like Protiviti and AuditBoard consistently shows that these costs have decreased over time as processes have become more efficient.
More importantly, we must weigh these costs against the benefits. The data is compelling: financial restatements, which initially surged after Sarbanes-Oxley implementation as companies 'cleaned up' their books, have shown a sustained downward trend.
According to the Center for Audit Quality, restatements rose sharply right after the law was enacted, to nearly 1,800 in 2006, but have generally trended downward overall since — with a substantial decline of 60 percent between 2006 and 2009. Restatements dropped 50 percent, from 858 restatements in 2013 to just 402 in 2022, XBRL reported.
America's capital markets remain the envy of the world precisely because investors trust them. Foreign companies willingly subject themselves to our rigorous standards because the resulting investor confidence translates into better valuations and capital access. This trust premium has contributed to trillions in market value growth over the past two decades.
As this regulatory reorganization is considered, we should ensure that any structural changes don't inadvertently weaken the broader framework of Sarbanes-Oxley that delivers accountability, transparency and investor protection. Instead, continued refinement of implementation and embracing technological innovations can make compliance more efficient without sacrificing effectiveness. The goal is evolution, not revolution.
Twenty-three years after its passage, Sarbanes-Oxley has become an integral part of America's financial architecture, contributing to a period of remarkable growth and stability in our capital markets. The political right and left came together to enact this landmark legislation because they recognized a fundamental truth: without trustworthy financial reporting, markets cannot function effectively.
Today, that core principle remains unchanged. While organizational structures may evolve, preserving the integrity of Sarbanes-Oxley's core principles isn't just good for investors — it's essential for America's continued economic leadership.
Richard Chambers worked in auditing in the U.S. Government Accountability Office. He is currently CEO of Richard F. Chambers and Associates and senior adviser at AuditBoard.