The Chilling Effect of SARBANES-OXLEY: Myth or Reality?

By Lynn Stephens and Robert G. Schwartz

When Congress passed the Sarbanes-Oxley Act of 2002 (SOX), apparently it gave little thought to its impact on start-ups and early-stage companies and their initial public offerings (IPO). The costs of complying with SOX led many to speculate that the law may inhibit companies from entering into the public markets to raise capital, or may cause companies that have been publicly traded to go private. The authors’ survey of technology entrepreneurs indicates that SOX may not be chilling entrepreneurship to the extent some had feared, but it also indicates that entrepreneurs need to become more familiar with the law’s provisions.

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Publisher's Column

Adding Significant Value with Internal Controls

Every company—an accelerated filer completing the second year of Sarbanes-Oxley (SOX) 404 compliance, a private company wanting to enhance internal-control quality, or a nonaccelerated filer looking at initial compliance efforts for 2007—wants to get as much value as possible for each dollar spent. Although initial efforts may be motivated by legislation, looking beyond compliance to achieving a market leadership position through internal controls can deliver significant value. Full Story

Ignorance of the Law Is Not a Defense

In this digital age, most of us have installed software on a computer. It’s basically the same process every time. After downloading a program off the Internet or loading a CD, you click “Next” through a series of screens before arriving at the ubiquitous License Agreement. You know the one: warning you to PLEASE READ THE FOLLOWING LICENSE AGREEMENT CAREFULLY; written in legal jargon; and the approximate length of War and Peace.
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Could Sarbanes-Oxley Benefit Non–SEC-Registrant Audits?

Reacting to the accounting abuses observed at Enron, the writers of the Sarbanes-Oxley Act of 2002 (SOX) felt a need to enhance the independence of SEC financial statement audits by shifting responsibility for audit oversight and auditor selection to an audit committee composed of three independent directors, and prohibiting auditors from providing certain consultation services to audit clients. Full Story

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