Reply #8: I am a CPA and have some knowledge of SARBOX

[joeglow3]

I say some, because I do taxes, so I have not had the exposure that by audit brethren have had. That said, I agree with an earlier poster the internal controls have been great and are exactly what was needed. The area that people are bringing up now is the requirement to "mark to market" investments held. Historically, financial statements have been kept on a historical basis. This means that an asset is kept on the balance at the price you paid for it and any gains/losses since then are only recognized when realized (i.e. sold). SARBOX required the companies to adjust the value of investments to market value on the close date of their financials. Many people don't like recording it at the market value on one given date, as the market is subject to short term swings. My understanding is that what we are seeing here is these companies are forced to mark their holdings down to what they are currently valued at. This, then decreases their net assets, which decreases what they are able to borrow and lend out. The argument is that these are long term assets which will rebound in value.

Thus, I can see how this has the potential to make the problem worse. However, I have a hard time believing it is the CAUSE of the problem.