Bus 102 Exam Paper

Bus 102 exam 2 study guide
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A. I chose Sarbanes Oxley Act (SOX) to be my policy. The goal of SOX was to fix auditing of U.S. public companies, consistent with its full, official name: the Public Company Accounting Reform and Investor Protection Act of 2002. By consensus, auditing had been working poorly, and increasingly so. The most important, and most promising, part of Sarbanes­Oxley was the creation of a unique, quasi-public institution to oversee and regulate auditing, the Public Company Accounting Oversight Board (PCAOB). It protects the investor from corporate fraud and to force executives to strengthen corporate ethical standards, but moreover, to solidify that the US market remains strong and that it is not only open for business,
It is in Title IV that the notorious Section 404 is located. Titled ‘Management Assessment of Internal Controls, Section 404 is what the end user of SOX, that is, the corporation itself and its CPA firm, has the most difficulty due to the compliance standards that essentially add the marginal costs to the firm. According to a survey by Korn/Ferry International, Sarbanes–Oxley cost Fortune 500 companies an average of $5.1 million in compliance expenses in 2004, while a study by the law firm of Foley and Lardner found the Act increased costs associated with being a publicly held company by 130 percent." Benefit- Companies are becoming more transparent. SOX is good for business for understanding how the business operates and for the consumer. greater awareness and ownership of business process owners [managers of functional departments]. Also, auditing committees are more interested in your ‘voice’ – taking the audit more seriously today – audit committees are much more engaged and a more diligent to their fiduciary requirements – partners and staff are more engaged and the clients are more interested … hence, good for confidence to be
The idea of government failure is associated with the policy argument that, even if particular markets may not meet the standard conditions of perfect competition, required to ensure social optimality, government intervention may make matters worse rather than better. I. SOX is fit to the market failure problem. According to Professor Jasso's article on Sarbanes-Oxley Act, "In the domain of economics and public policy, Enron represents a market failure under the theory of information asymmetry. It is much easier, perhaps, to analyze a market or firm that declines or fails because of outlying economic indicators – diminishing product demand, failure to innovate, global competition, natural disaster to name a few." History indicates that corporate fraud and its public policy components of market failure and information asymmetry requires some social institution to cure the problem. When the market fails, society looks to government primarily for its ability to create laws and allocate resources on a broad national and global scale. Therefore, we have SOX now. B. Enron scandal and stock market crash are examples of market failure. Because of