Greg

Resource Proposal #1 (more on proposals)

Type (Biz, Gov, or Soc): Business

Name of Resource and Citation: McGladrey SOX Reset 2014 – http://mcgladrey.com/content/mcgladrey/en_US/what-we-do/services/risk-advisory/risk-bulletin/sox-reset-2014.html

Topic for Paper: Sarbanes-Oxley

Your proposal.

The policy of interest is the Sarbanes-Oxley Act of 2002 (SOX). SOX has been proven to improve the reliability of companies’ financial statements providing more transparency in the market. It is also believed to improve internal controls as well as corporate governance for companies under the law. SOX encourages centralization of controls as well as enterprise-wide risks.

This source adds to the idea of SOX encouraging a centralized approach to controls; especially with respect to risk. It is more effective for a company to group all risk together as “enterprise-wide risk” rather than viewing risk in silos of financial reporting risk and operational risk. This source also explains the importance of technological gains within business which should be used to integrate different business processes. IT controls are becoming increasingly important. This source ends with the idea that the overall effect of the movement towards unified compliance is still not known, but that there will be a greater correlation between risk governance and changes in the business environment.

Seems clear.

While my exact argument is still to be determined, I will be arguing in favor of this source. With respect to the transparency of financial markets as well as internal controls of public companies, I am arguing in favor of SOX. Even without defining my exact argument, one of my overall goals will be to present both the positive and the negative aspects of SOX. This source expands on the already common belief of SOX providing transparency of financial statements and therefore the market, and it will be very useful to my argument.

This information must be reliable or else McGladrey would most likely not receive very much SOX business. On the other hand, it is in McGladrey’s best interest to promote the positive aspects of SOX including the transparency of financial reporting and the improvements in internal controls. I do not see this bias affecting the validity of the information provided in this source because there are various studies that have been conducted that support these ideas.

Resource Proposal #2 (more on proposals)

Type (Biz, Gov, or Soc): Social

Name of Resource and Citation: Corporate Governance with Richard Thornburgh – http://www.brookings.edu/research/expert-qa/2008/05/30-issues-thornburgh

Topic for Paper: Sarbanes-Oxley

Your proposal.

The policy of interest is the Sarbanes-Oxley Act of 2002 (SOX). SOX has been proven to improve the reliability of companies’ financial statements providing more transparency in the market. It is also believed to improve internal controls as well as corporate governance for companies under the law. SOX encourages centralization of controls as well as enterprise-wide risks.

This source agrees with the idea that SOX has benefited financial reporting and internal controls, but it challenges SOX in that it has not done enough. The premise of the source is that the real problem exceeds the legislative grasp of the government. SOX helps but it does not do enough. Instead, there needs to be an industry-wide focus on corporate governance and best practices for business as a whole. The focus needs to come voluntarily rather than being imposed upon by legislature.

Ok.  Clear.  How might such a voluntary and professional effort come into being?

I like how this source ties into my argument because while it acknowledges positive aspects of SOX, it is ultimately against my argument. One of my overall goals is to highlight both the positive and negative aspects of SOX. This source provides a unique way of shining a negative light on SOX because it does not deny any of the positive aspects of the law. Instead, it criticizes SOX for not reaching far enough.

This information is reliable considering the background of Dick Thornburgh’s political career. He has a great deal of experience in “white collar crime” even if it was many years ago. Because of his background he might be more likely to take the stance that he did, but I still think his opinions are valid.

He is a Republican.  I think he was Attorney General for Reagan?  Did Brookings have other reports on SOX?

Resource Proposal #3 (more on proposals)

Type (Biz, Gov, or Soc): Government

Name of Resource and Citation: http://www.sec.gov/news/studies/2011/404bfloat-study.pdf

Topic for Paper: Sarbanes-Oxley

Your proposal.

The policy of interest is the Sarbanes-Oxley Act of 2002 (SOX). SOX has been proven to improve the reliability of companies’ financial statements providing more transparency in the market. It is also believed to improve internal controls as well as corporate governance for companies under the law. SOX encourages centralization of controls as well as enterprise-wide risks.

This is basically the ultimate resource with regards to SOX and its cost to smaller companies. The study tries to determine a way to lower costs and fees related to SOX for small public companies with market cap between $75 and $225 million.

Good.  Let’s also keep in mind that “small” here is not like a mom and pop shop.  $75 million market cap is small, but size is relative.

Additionally, it includes research, data, and results from numerous past studies on the topic both from government and non-government sources. There is an incredible amount of information included in this source that can both add to and challenge prevailing thinking. A few helpful conclusions reached from this study and others include: Costs have decreased over time [particularly from Section 404(b)], financial statements have become more reliable, and that there is no conclusive evidence to suggest SOX costs have decreased the number of IPO’s in the $75-$225 million float range.

Even if there were fewer IPOs, why is this perse bad?  I mean, if SOX says, look, you need to be at X level of risk management and transparency, and if you are not, well, then maybe you as a company are not worthy of the generalized trust of the financial markets.

This source definitely helps me develop my ideas. I either want to focus on how SOX costs and fees differ proportionately from small companies to large corporations or if the additional costs of SOX have deterred private companies and investors from going through with IPO’s. There seems to be more discrepancy through research with the latter. For instance, this sources determines there is no conclusive evidence that supports the claim, but there are other non-governmental studies that provide contrary evidence.

“This is a study by the Staff of the Office of the Chief Accountant of the U.S. Securities and Exchange Commission.” I would think the information is very reliable and without a great deal of bias. The source is incredibly valuable for this reason as well as it is a gateway to many other studies done in the past. It will be interesting to read other nongovernmental sources that may be more likely to admit SOX has contributed to the decrease in IPO’s since its inception.

I think the SEC in general would be interested in a healthy IPO rate.  But, yes, it would be good to see if other research shows a negative relationship between SOX and IPO rates of issuance (IPOs coming onto market).

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