n this activity, you will explore the potential consequences when small public companies are exempted from Sarbanes-Oxley Section 404(b) requirements for internal control audits. You are presented with the real-world case scenario of the Koss Corporation, in which a large embezzlement was perpetrated over the course of five years by circumventing the company’s financial reporting and internal controls. You will consider the role of the company’s CEO, Michael J. Koss, when filing misstated reports and financial statements with the U.S. Securities and Exchange Commission, and you will reflect on the role of the external auditor, Grant Thornton, who provided auditing services according to the guidelines of auditing of “smaller reporting companies” under SOX Section 404(b)
Your paper should be approximately 2 pages long. Use in-text citations as appropriate to support your answers.
In your opinion, should smaller public companies be exempted from SOX 404(b)?
Do you think that the auditors’ responsibility in auditing small public firms that are exempt from Section 404(b) of SOX is different from their role in auditing large accelerated filers that are subject to SOX 404(b) reporting requirements?
The relationship between regulation and ethics is often unclear. Discuss the key ethical issues in this case and speculate on how the SOX regulation possibly played a role in Koss’ ethical environment.
