Sarbanes-Oxley Act Provisions

In: Business and Management

Submitted By bond81904
Words 1244
Pages 5
Sarika Bond
Auditing-Ambler
Short Essay #2
November 3, 2009

Sarbanes-Oxley Act Provisions

Publicly held companies are mandated to specific regulations of Sarbanes-Oxley Act; while privately held and non-profit companies are not specifically required to adopt the provisions of Sarbanes-Oxley Act (SOX). I don’t agree with private companies adopting the entire provision of Sarbanes-Oxley Act. I do support adopting certain parts of the Sarbanes-Oxley Act provision. It is cost prohibitive for private and nonprofit companies, especially for small private companies. Private companies and non-profit companies do not have to adopt the provision of Sarbanes-Oxley act, but they may pick and choose part of the governing principals that apply to them. There are advantages and disadvantages to adopting The Sarbanes-Oxley Act for private and non-profit companies. The advantages are that private companies that intend to go public in the future have already established an auditing committee, a whistleblower protection policy, and improved internal controls. The disadvantages are it is costly to adopt Sarbanes-Oxley Acts and requires hiring an outside independent auditor. It also creates more paperwork, such as checklist full of questions. My main argument with not adopting the entire Sarbanes-Oxley Act is that it is very costly for small private companies. “A survey of more than 300 public companies by Financial Executives International determined an average, first-year compliance cost of $3.14 million per company. Due to the high price tag of compliance, nearly 20% of public companies are considering going private and many have done so.” (Kimmerling, CPA). For small companies many provisions are unnecessary. “One example is the need to create a board of directors and audit committee with qualified members, then recruiting and paying financially literate individuals…...

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