In the wake of Sarbanes-Oxley, which was passed in 2002, there was a multi-year, mad rush to comply with Section 404, which vexed more than a few companies.

The compliance process was costly, but many finance units eventually got it right, working out controls and processes that ultimately satisfied tests by their auditors. Many were able to hone their efforts to the point that massive investment annually was no longer necessary. At this point, we have to ask: Are companies starting to backslide just a bit?

Lacking a broad research effort, that's a hard question to answer. But it would not surprise me if more finance units were "moving on" in a sense. The once-intense focus seems to have dissipated. Perhaps Sarbanes-Oxley can no longer been seen as the accountants full employment act. The hiring and resource deployment may be in other areas. And then there's the recent suggestion from James Doty, the chairman of the PCAOB, that audit firms may indeed be backsliding a bit.

Doty recently confided to Reuters that internal financial controls are not being properly tested by outside auditors.

"This is a very major issue for us," Doty said.

It may be that auditors are now replying too much on third party work and the work of the client company itself.

"Some auditors are just taking the business process that the company has put in place as a control," He said.

While most auditors feel that they have the green light to rely more on management, this is certainly tantalizing, and we do wonder if the PCAOB will have more to say on this formally in the near future.

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PCAOB continues efforts to reform financial statement