Question

According to some U.S. companies, what gives foreign firms a competitive advantage in the capital market?A. The foreign companies don't have standards similar to GAAP.
B. The foreign companies don't have strict ethical codes.
C. The Sarbanes-Oxley Act which requires more stringent internal controls on U.S. firms.
D. The foreign companies don't have to be audited.

Answer 1

Answer:

The correct answer is letter "C": The Sarbanes-Oxley Act which requires more stringent internal controls on U.S. firms.

Explanation:

The U.S. Sarbanes-Oxley Act of 2002 (SOX) is a legislative response to several corporate scandals that sent shockwaves through the world financial markets. The SOX attempts to strengthen corporate oversight and improve internal corporate control. After this act, strict rules for certified public accountants, auditors, and high-executive officers were imposed with more strict recordkeeping requirements.

Some U.S. firms allege the SOX is a drawback for them compared to the legislation foreign companies have which are usually less strict.