SOX… life, death or transformation for small firms
by Greg Tondi, Joseph Riotto
International Journal of Critical Accounting (IJCA), Vol. 3, No. 1, 2011

Abstract: The costs of the Sarbanes-Oxley Act of 2002 have been tremendous on small firms. Will there be life, death or transformation for the firm? Although SOX has addressed the concerns relating to the financial scandals of Enron and WorldCom and somewhat restored investor confidence, the financial costs of doing so cannot be ignored. Of the Act, Section 404, effectiveness of internal controls over financial reporting, has been the largest cost burden on small firms. Large companies are better able to absorb the costs and have the necessary resources to comply as opposed to small firms. As a result of the high costs, some small firms have opted to go private, sell their company, or merge with another company. A new auditing standard was introduced recently to help make compliance less complex, and therefore, reduce costs.

Online publication date: Tue, 21-Oct-2014

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