In the wake of Enron, congress passed SOX that was supposedly to prevent a repeat of Enron and enormously increased audit requirements. However, for SOX to actually have any meaning (other than large gift for the audit industry), it required regulatory agencies like SEC to do something. Note that SOX also required SEC to do something about the rating agencies (implicated in recent financial mess with estimated $27T ... that's like ten to the twelfth ... in triple-A rated toxic CDO transactions during the period).

However, a repeated theme in the Madoff hearings, SEC was doing little during the period. The person that testified they tried for a decade to get SEC to do something about Madoff, also mentioned that tips (whistle blowers) turn up 13 times more fraud than audits.

In the middle of the last decade, I was at a financial conference in Europe ... with CEOs of European companies and presidents of European exchanges ... and the major discussion was that SOX audit burden was starting to leak into Europe (I took position that the possibly the only provision that might make a difference was the whistle blower section ... this was well before the Madoff hearings; but was seen for it to be effective, it required action by regulatory agencies).

However, apparently because (even) GAO didn't believe that SEC was doing anything during the last decade, GAO started doing reports showing uptic in public company fraudulent financial filings (even with the enormously increased SOX audit burden). From recent quote on the web: "Enron was a dry run and it worked so well it has become institutionalized".

tv business news shows past week or so have had periodic rants against SEC issuing guidelines on whistle blower provisions (nearly a decade after whistle blower section showed up in SOX) ... seemingly much stronger opposition than the rants against SOX audit provisions;

since SOX audit provisions actually cost quite a bit more than whistle blowers ... could the rants against whistle blowers be because they actually turn up 13 times more fraud (than audits; not because they cost significantly less).

Jim HOrst writes:

By the way, we all know there is no such thing as "independence" in the external financial audit (attest) function in the US. Based on current system, there can't be. What we have is a system where those in charge of financial reporting and those responsible for auditing have written the rules to benefit themselves, rather than the investing public. (See this BusinessWeek interview with Arthur Levitt, former SEC chairman, and this excerpt from his book, "Take on the Street.")

Wouldn't it be laughable if the Chicago Cubs hand picked their own umpires for each game, paid them directly, went out to lunch with them, and paid them for other work unrelated to baseball? Would the other teams think this fair? Of course not. Why? Because such actions would surely compromise the independence of the umpires.
How could they call balls, strikes and plays fairly?

Yet, look at how CPA firms operate with companies they audit. The company hand picks them, pays the CPAs a fee directly, chums around and plays golf with them, and the CPAs do other unrelated work for additional fees. ....