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    Practical Research - Sarbanes-Oxley Act

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    The research question:
    Are the costs associated with compliance of the Sarbanes-Oxley Act outweighing the benefits that it provides to investors and the public?

    Sub-problems: 1) high costs of initial compliance
    2) The major set of accounting rules and standards facing large corporations but that must also be used by companies of all sizes.

    By focusing on both of these problems, provided an accurately determinations of both direct and indirect costs associated with compliance with Sarbanes-Oxley.

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    Whether cost of Complying with Sarbanes-Oxley Act outweighs the Benefits
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    The enactment of the Sarbanes-Oxley Act or Investor Protection Act in 2002 has been one of the most debated laws in America. The passing of this Act changed the American corporate landscape and has still remained the topic of major controversy between those who support it and those who don't. Sarbanes-Oxley Act (SOX) was enacted in the wake of great corporate scandals involving Enron and WorldCom that had far reaching effects in investor confidence. It was meant to protect investors from fraud and improve transparency in public companies' financial reporting and practices (Business Management, 2011).

    There has been increased debated over the cost and benefit of these Act to investors and companies. While some scholars documented a reduction in cost of capital (Li, Pincus & Rego, 2008; Jain & Rezaee, 2006; Young, 2008), other scholars found that the cost of the Act far exceeds the benefits (Zhang, 2007; Wintoki, 2007; Engel, Hayes and Wang, 2007). This research study analyzes extensively the costs associated with compliance of the Sarbanes-Oxley Act, and seeks to add new knowledge on the existing body of knowledge on the topic.

    Objectives of the Study
    The study intends to answer the question "Are the costs associated with compliance of the Sarbanes-Oxley Act outweighing the benefits that it provides to investors and the public?" by seeking to fulfill the following research objectives:
    1. Analyze the costs of initial compliance
    2. Discuss the major set of accounting rules and standards facing large corporations but must also be use by smaller sized companies.

    Significance of the study
    The findings of this research will provide additional knowledge on the effectiveness of Sarbanes-Oxley Act of 2002, and will be a useful informational tool for further research study in this particular topic. The findings will also be great significance to law makers, investors and to companies in understanding the costs and benefits of this law.

    Research methodology
    Information will be gathered from secondary data sources which will provide important information on other studies that have already been done in this area and will provide well synthesized data that can be used in this research study. In specific information from the scholarly studies, the press and business reports will be used to get information on the costs associated with compliance of the Sarbanes-Oxley Act.

    The research has also drawn information and data from previous research conducted in this field. In this type of study, there are many previous researches by scholars, which are invariably supported by their own primary data. The secondary research draws from those primary sources. Therefore, the data collected through secondary research can have equal reliability with those data collected through the primary sources (Saunders, Lewis & Thornhill, 2007).

    Initial costs of compliance
    Since the introduction of SOX, firms have had to spend higher cost on compliance bills, ...

    Solution Summary

    Practical research for Sarbanes-Oxley Act are examined.