(c) Construct the arguments in favour of Professor Leroi’s remark that external reporting

Question

(c) Construct the arguments in favour of Professor Leroi’s remark that external reporting requirements on internal

controls were ‘too ambitious’ for small and medium companies. (4 marks)

Answer 1

正确答案：
(c) The external reporting requirements (from the Sarbanes-Oxley section 404) being ‘too ambitious’ for small and medium
companies
There are several arguments to support Professor Leroi’s remark.
Fewer spare resources to carry out internal control. SMEs tend to operate with lower levels of spare resource than larger
businesses and conducting internal reviews would be more of a challenge for them.
The extra attestation fee (over and above normal audit fee) for the attestation of the internal control report could be a constraint
for many SMEs.
Lack of expertise from within existing employees (to internally audit/police as well as carry out internal activities) would be a
likely constraint.
SMEs will have fewer activities and less complexity, hence less need for shareholders to require the information (less to go
wrong).