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Accounting Department
Saw the Lightning, Still Waiting for the Thunder: The
Third Year of SOX
By Greg Rogers, J.D., CPA
Since the enactment of the Sarbanes-Oxley Act of 2002 (SOX), many experts have
speculated that strengthened financial reporting requirements might spell the
end of mothballing — the practice of indefinitely sequestering contaminated
properties to delay or avoid cleanup costs. Indeed, some have predicted that
the law will open the corporate property floodgates, causing thousands of brownfield
sites to become available for redevelopment.
Will SOX force public companies to account fully for environmental liabilities,
and, if so, will this be enough to motivate companies to transfer their contaminated
properties? Almost three years after the enactment of SOX, both remain open
questions. We saw the lightning, but are still waiting for the thunder.
It might be a mistake, however, to confuse silence with inactivity. SOX is still
in its infancy. Management and auditors are still working their way up a very
steep learning curve and environmental is on the other side of the crest. Also,
because of the technical complexities and legal sensitivities, environmental
disclosure is an issue most managers, auditors and internal control consultants
would prefer to put off as long as they can.
But how long will SOX allow deferral of the issue? With the first round of internal
control audits out of the way, will 2005 be the year that environmental accounting
moves to center stage? As we move into the third full year of the SOX era, there
are several leading indicators to keep an eye on.