Question

The Roland Company needs to comply with the financial reporting standards of the Sarbanes-Oxley Act. One of the employees, Ken, believes that the costs outweigh the benefits. However, his boss feels the opposite, that the benefits outweigh the costs.
Who is correct?

Answer 1

Answer:

The boss is correct.

Explanation:

Under Sarbanes-Oxley Act, a  rules-based approach to corporate governance and reporting is used. It is based on the view that companies must be

required by law (or by some other form of compulsory regulation) to comply with established  principles of good corporate governance.

Except in the instances of exceptions provided in the act, company has no choice than to comply regardless of the cost implication because non-compliance is punishable under the act. Sometimes, it is called tick box approach

This is contrary to what is obtainable in a principled-based approach where allowance is given for explanation in the event of possible con-compliance.