Speaking of costly yet necessary evils -- the regulation that resulted from the Enron scandal, the Sarbanes-Oxley Act (SOX), has cost many public companies. Both the time and money necessary to just implement SOX has been a tremendous burden on many organizations. However, if implemented well, maintenance would not be nearly as costly and, I would argue, that companies could see some benefit in the strengthening of their internal controls. Do you agree? Do you think SOX has been worth the cost and effort? Or is it yet another hurdle to jump just to be able to do business?
The big issue with SOX, in my opinion, is that the benefit mostly accrues to the public and the costs are localized with the public firms. The public firms have no way of really determining the benefits, but they see the large concentrated costs vividly. While there were many provisions, many that improved the audit and reporting process, there is one that seems difficult to show as generating benefit greater than cost.
The largest cost of SOX is the cost of documenting, testing and auditing the internal controls over financial reporting. The other provisions are not as costly to implement and so they have not gotten the scrutiny and complaining. The public firm complain, especially if they were already fairly diligent about the controls over reporting, had executives that were not trying to play fast and loose with the reporting guidelines, and were respectful of the auditor's independence. For those firms, they were forced to document their already good habits. It seemed like a waste of time and money. However, ...
Your tutorial is 584 words plus two references and argues that Sarbanes Oxley (SOX) has generated benefits in excess of cost. One provision is mentioned as being less clear about benefits exceeding costs.