Chap 1 Notes_Part_12

Chap 1 Notes_Part_12 - 1. State the pros and cons of those...

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Forces Promoting Quality Audits Cost/Benefit Debate on the Sarbanes-Oxley Act (SOX) SOX is unnecessary regulation of the profession. The costs of requirements, such as reporting on the effectiveness of internal control over financial reporting, greatly exceeds the benefits. These increased costs will discourage companies from issuing public traded such stock in the United States. The regulation also gives a competitive advantage to international CPA firms because they are best prepared to meet the increased requirements of the Act. Three things already provide sufficient assurance that quality audits are performed without PCAOB oversight. They are competitive pressures to do quality work, legal liability for inadequate performance, and a code of professional conduct requiring the CPA firms follow generally accepted auditing standards.
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Unformatted text preview: 1. State the pros and cons of those comments 2. Evaluate whether the Sarbanes-Oxley Act and PCAOB regulation are worth their cost. Competitive Pressures to do Quality Work Pros: 1. 2. 3. 4. Cons: 1. 2. 3. 4. 5. 6. Competitive Pressures to do Quality Work Pros: 1. promotes innovativeness and efficiency 2. SOXs compliance is more difficult for nonBig 4 3. Lower costs past on to society 4. Better confidentiality 5. No interference from the government Cons: 1. Fees down -> costs down substandard auditing 2. Short run profit maximizers may hurt profession 3. Wages lower -> attract less talented students 4. Less cooperation among firms 5. Profession less collegial 6. Less sharing of knowledge -> more inefficiency 7. Marx -> duplication of function e.g., more spent on advertising...
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Chap 1 Notes_Part_12 - 1. State the pros and cons of those...

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