accountants.bmpSarbanes-Oxley, a batch of legislation passed in 2002 to tighten financial controls at public companies in the wake of the Enron and Worldcom disasters, is generally a good thing.

It has one major flaw, however: A lack of guidance to companies about exactly how to comply with the Act. It hits small companies hard, because they’re forced to hire expensive accounting and legal help to interpret what are often vague guidelines. They end up overpaying, to ensure they comply.

This is great for accounting companies’ bottom line, of course. But Mark Heesen, president of the National Venture Capital Association blasts the accounting industry for the shortcomings.

His critique comes in response to a report by the the Committee on Capital Markets Regulation, an independent, bipartisan committee composed of corporate and financial leaders formed in September to outline how to make U.S. capital markets more competitive.

markheesen.bmpThe report comes two weeks before the Securities & Exchange Commission begins to debate how to reform Sarbanes-Oxley. Specifically, the report suggests that small companies — those with a market capitalization less than $75 million — be allowed to defer compliance to the Act. That’s a good start.

However, Mark Heesen, president of the National Venture Capital Association, singles out the accounting community for special criticism. He says the industry’s footprints were all over the report, and says it doesn’t go far enough in making accountants more accountable:

…that the accounting community is charging huge fees for 404 and not taking any responsibility as to decision making authority to decide what is material and what is not material is mindboggling.

Here’s where you can find a copy of the group’s report.