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Communicating and Interpreting

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Submitted By DimitriH7
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Unit 3 Assignment 3

Shuronda Hampton

MBA6014

Financial Accounting

215 Paula Drive

West Monroe, La 71291

Telephone: 318-397-5608

Email: shampton18@capella.edu

Instructor: James Shelton

There is an ongoing debate about the cost-benefit relationship or internal controls and their ethical implications. The New York Times posted an article in 2012 describing the burden and high cost that this implication takes on small companies. It is the fact that the system takes an approach that size fits all, that smaller firms have a much bigger burden. In this article, it states that the costs of developing the required internal controls can run as high as $5 million to $10 million for a small company once it goes public because private firms do not have to have the same accounting and compliance structures in place as larger corporations. As you can see, this can be a problem for new startup companies that are not bringing in the revenue to cover this price. In response to this problem, Congress passed the JOBS Act that would help smaller public companies avoid this for a few years the internal controls reporting and audit requirements put in place. All these acts and rules were put in place to prevent a repeat of the scandals that cost investors billions. Companies are now required in annual reports to have chief executives and chief financial officers attest to the effectiveness of the internal control structure and procedures of the issuer for financial reporting. The outside auditors also have to test the internal controls and give an opinion on their effectiveness. This system is a check and balance so that the company will abide by the rules that the government has provided for them to follow. The ethnical issue at hand is trying to prevent the internal control and other members of these small companies and big organizations from

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