Essay: Smaller Audit Firms

Sample Essay

The cost of additional compliance was incurred by the smaller companies. In a particular section 404 that was considered as the most debatable rule requires company’s CEO, CFO and external auditor to provide assessment of the company’s internal control over the accuracy of financial statement (Oxley 2002). This section adds additional cost burden on smaller audit firms to carry out the audit of their clients.

It was later suggested to be scaled down for smaller businesses however this would create a disproportionate balance in the applicability of SOX and the objective of reinforcing assurance to the accuracy of disclosed financial information would again not served completely. This is the reason that the stricter regulations and penalties have likely contributed to sharp rise in firms going private since SOX was enacted  (Freeman 2002). An imbalance is created because of the disparity in the authority and compalince issues of SOX. A number of concerns were raised over small businesees because these business have to incur hefty amount of losses because the standards that were set by SOX and PCAOB were not a viable approach for small businesses.

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