Question

explain the cost and the benefits of sarbanes oxley act.

Answer 1

There is, however, also considerable concern about costs and counter-productive Section 404 impacts. As to some implementation issues that have been raised --

• One charge is that companies can no longer look to their auditors for advice on difficult accounting issues. AS No. 2 is not intended to erect a wall between auditors and clients. Auditor-management free and open communications concerning financial reporting and internal control issues are still permissible.
• AS No. 2 is not a “cookbook” of auditing procedures. It is not possible -- or desirable -- to supplant auditor judgment with detailed procedures, but the Board is committed to monitoring how auditors exercise their judgment.
• While it is necessary for the auditor to understand the overall control system and to “walk through” the operation of all significant processes, the focus should be on what is material to the financials, not on the trivial.
• Smaller, less complex businesses typically need less complex controls, and the work of the auditor should reflect that fact. Internal control auditing, like financial statement auditing, is not a “one-size-fits-all” exercise. Board members have stated publicly that we will also use our inspection program to make sure that smaller companies are not subjected to needless cost and burdens.

Section 404, like any other regulatory requirement, should be able to stand the scrutiny of cost-benefit analysis. However, several things should be borne in mind