Do the costs of certain aspects of the SOX legislation outweigh the benefits?
A fundamental rule of accounting and business management in general is that if the cost of an action is greater than the benefit received, the action should be avoided. This guideline has been highlighted with the passing of the Sarbanes-Oxley (SOX) legislation.
While the necessity of the SOX legislation is apparent, when does the cost outweigh the benefits? Certain aspects of this legislation will be (and are currently) so expensive for companies to adhere to, it will likely put many mid and smaller sized firms in jeopardy. Does this really benefit anyone?
Although the SOX legislation has highlighted this basic fundamental rule of cost versus benefits received, there are business decisions made every day with this rule in mind. It will be interesting to see the affect this legislation will have in the coming months on the business world.
