Tomatoes and bananas

THE SIDEBAR "PAYING THE PIPER," IN "Looking under the Hood" (May), which dealt with the increased costs of audits due to Sarbanes-Oxley's Section 404 requirement, reminds me of an old grocery-store owner's saying: "What you lose on the tomatoes you make up on the bananas."

At the beginning of the technology era, the firm with which I was associated for 50 years encountered a prospective client. The client was designing software that everyone would want. One of my partners was discussing our possible role with their effort. But the client wanted an audit first. Their response to our proposal: "You lose. Firm X [not the real name of the then Big Eight firm] agreed to do the audit free for five years, if they get to help us sell the software to the government."

If you looked at the proxy statement disclosures so far this year compared to last, for those that disclosed the fees breakdown, "other" accounted for half of the total fees paid to the auditors. Sarbox made the "other" go down, so the price of audits was bound to go up.

Stephen Tanner

Via E-mail

COPYRIGHT 2004 CFO Publishing Corp.
COPYRIGHT 2004 Gale Group