One interesting item from the article is the evidence on the cost of SOX. First, it is undeniable that SOX has helped in shaping the behavior of financial institution since its adoption by SEC and PCAOB. The article, however, finds that there are both direct and indirect costs associated with SOX. The costs of SOX is interesting as they have for a long time been associated with the changes in the market environment and changes in legal, regulatory and accounting frameworks. The costs associated with SOX compliance impacts the confidence that companies have in their management costs. The costs result from the requirement in the three sections; 302, 404a, and 404b. Complying with sections means that firms will pay disclosure reports, tests for internal control structure and procedure, and auditors test on internal control structure.
It is easier for individuals to disprove the need for SOX and arguments on whether it was a necessary move. The fact is SOX has increased flexibility with which policies are made, and thus good policies can be encouraged, and those that don’t can be dropped with ease. Further, the regulation costs like audit fees and IC costs that result from the use of SOX are direct which makes them more visible to individuals. Following the direct easy-to-note costs, it may be challenging to convince individuals that SOX has more benefits than costs. As such, the program necessitates a need for a cost and benefit analysis. Even with the costs associated with SOX compliance as stipulated in SEC and PCAOB, companies benefit more in their financial reporting and management of funds. With compliance, companies can ensure accountability from all aspects; a factor that is worth more than the costs.
Delegate your assignment to our experts and they will do the rest.
