Sarbanes-Oxley

The independence and control procedures laid out in the Sarbanes-Oxley Act were designed for a large, complicated corporation whose investors were far removed from management. The increased costs of compliance with these requirements make being a "public corporation" far more expensive for small firms. Consequently their ability to raise capital may be inhibited by their audit budgets.

The most obvious additional cost from the Sarbanes-Oxley Act is the audit of internal control procedures. The control procedures of a company must now be examined in addition to the transactions, usually by another CPA firm. "Interviewees estimated this additional attestation fee would range from 25% to more than 100% of current audit fees." (Coustan et al.)

Assessing internal controls is nothing new to CPA's. Indeed, the testing of internal controls is often done weeks or even months before the actual audit. In

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only the beginning of a good audit committee expert. Effective oversight of a corporation's risk and control environment requires skills well beyond an understanding of GAAP accounting. Monitoring cash flows, tracking capital expenditures, and following operational key value drivers are all part of this oversight, along with safeguarding internal controls from manipulation by senior management. (Grace and Haupert 8) The audit committee is certainly responsible for preventing management fraud. The main job, however, of the board of directors is to run the company. Time that is spent going over audit reports, particularly with management not in the room, is time the board cannot spend doing its primary job. The SEC and others involved must recognize that a board's primary responsibility is the understanding, approval, and oversight of the corporation's strategic and operational aspects. The audit committee aids the board by overseeing the firm's risk and control environment and monitoring the financial reporting process. (Grace and Haupert 8) Few have argued that some sort of legislation was needed to restore investor confidence. In fact, there are many in the accounting profession who believe that the ideals and pro
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Approximate Word count = 2048
Approximate Pages = 8 (250 words per page)

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