So a new survey commissioned by the Center for Audit Quality has found that most audit committee members believe audit quality is superior post-Sarbanes Oxley. According to the survey, 53 percent of the audit committee members said overall audit quality was "very good,'' and another 25 percent described it as "excellent." And 87 percent said the risk of inaccuracies in financial statements due to fraud was "not very high," and 60 percent said risk had declined after the passage of SOX and nearly two-thirds (65 percent) agreed that investors should have more confidence in the markets as a result of the 2002 law.

No doubt investors in Bear Stearns might take a different view. That is despite warnings from Deloitte & Touche last year, reported here, about problems in fair value accounting for assets in two of Bear Stearns' hedge funds. "These values may differ from the values that would have been used had a ready market for these investments existed, and the differences could be material," Deloitte & Touche said. Read those words carefully. Translated, that means the investments were designed to fall apart if the market turned bearish.

Which leads to an interesting question from Larry Ribstein in his Ideoblog: "Is there potential SOX internal controls liability for Bear executives? If not, and melt-downs like this can happen after SOX (worth $80+/share one day, $2 the next), then what was it, exactly, that SOX did for us? ... So two possible lessons from Bear: We didn't need SOX, and it didn't do any good."

Meanwhile, serious questions need to be asked about the regulators with the Federal Reserve agreeing to sell Bear Stearns to JPMorgan Chase & Co. for about $250 million and also fund $30 billion of Bear Stearns assets that can't be flogged quickly. "The Federal Reserve's extraordinary response Sunday to Bear Stearns Cos.' looming collapse signals an unnerving new phase in the protracted credit crunch. No longer is the Fed simply pumping money into the economy to promote lending. It is now putting taxpayers on the hook for investments of uncertain value and extending federal help to Wall Street firms whose activities haven't been regulated as closely as commercial banks," says the Los Angeles Times.

At the same time, the Fed couldn't allow the Bear to die because it was so interconnected. That would have brought the whole house down.

But it does raise serious questions about the role of Securities and Exchange Commission's vigilance. "It's really speaking to the lack of good supervision by the SEC. They're not really a real regulator staying on top of things,'' David Hendler, an analyst at CreditSights told Bloomberg.

And certainly Sarbanes-Oxley, which had been put in place to protect investors, turned out to be useless.