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Is SOX Worth It?

By Dennis P.R. Codon and Karin L. Vaccaro
May 25, 2005

With the imminent phase-in of the SEC rules implementing Section 404 of the Sarbanes-Oxley Act of 2002 (SOX), which requires public companies to issue a management report and submit auditor attestation regarding the adequacy of the company's internal controls over financial reporting, the public debate over the cost-benefit analysis of SOX has intensified. The Sarbanes-Oxley Act and its implementing rules have provoked much controversy in their attempt to strike the right balance between protecting investors and unnecessarily cannibalizing scarce corporate resources owned by those same investors. While the SEC has historically offered concessions to smaller public companies due to the relatively higher regulatory burdens placed on them, it remains to be seen whether the SEC will continue to be sensitive to the burdens on smaller public companies in the implementation of SOX.

Congressional Response to Demand for Radical Reform

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