A decade after its passage, the Sarbanes-Oxley Act of 2002 (SOX) is st

A decade after its passage, the Sarbanes-Oxley Act of 2002 (SOX) is still maligned. As the RAND Corporation and others noted early on, its effects have taken a quantifiable and pronounced toll on smaller businesses that have paid a higher cost on a relative basis for the auditing and accounting fees required for compliance with Section 201 and other sections of the act. Furthermore, the RAND study quantified deregistering in the immediate wake of the act, finding that it occurred more frequently among smaller firms. As the study noted, however, the exit of some small firms from the public sphere, particularly if they had engaged in financial misstatement, may have also increased investor confidence in the remaining market players.

In addition to the adverse effect on small businesses, detractors today cite the effect of SOX on the ability of U.S. firms to compete in the global market, noting the exodus from the NYSE to the less regulated London Stock Exchange, now the true nexus of international finance. More hyperbolically, they suggest the disruption of the free market.

Other more recent charges against the act include its having stood in the way of the creation of new businesses and having cost investors billions of dollars instead of protecting them from losses. Even a 2012 study pointing to the decrease in the number of COOs and the trend toward the elimination of the COO position from the corporate hierarchy chart, most likely in response to Section 302 requirements, blames Sarbanes-Oxley.

1. It is possible that the author regards all of the following as conceivably legitimate or reasoned complaints against Sarbanes-Oxley EXCEPT:

(A) the pre-eminence of the London Stock Exchange in international finance.
(B) the burden of audit costs borne particularly heavily by smaller companies.
(C) a decrease in the competitiveness of U.S. firms abroad.
(D) the adverse effect on investors of the early deregistration of many smaller businesses.
(E) a general limiting effect on the creation of new businesses.


2. It can be inferred that Section 302 of the Sarbanes-Oxley Act mentioned in the last paragraph

(A) links the COO position to financial misstatements of the past.
(B) does not require COO participation in oversight requirements.
(C) outlines a new corporate hierarchy relative to financial audits.
(D) undermines a reasonable non-intrusive measure to protect investors.
(E) criticizes previous Securities and Exchange Committee filing requirements.


3. Which of the following best expresses the author’s attitude toward Sarbanes-Oxley?

(A) It has cost businesses billions of dollars while failing to achieve its oversight purpose.
(B) Its greatest impact has been on smaller businesses, which have suffered disproportionately.
(C) It is a source of continued complaints, some of which are inaccurate or overstated.
(D) The negative criticism it has garnered over the years is, in the main, deserved.
(E) Those calling for the early repeal of the act have been validated over the years.