ASSIGNMENT 1
IMPACT OF THE SARBANES-OXLEY ACT (SOX)

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Outline three (3) ways in which your medium-sized private company may benefit from going public, providing a rationale for each.

Supporters of companies going public suggest that gaining additional capital is one of the benefits medium sized companies gain by going public. The rationale for going public is to float the shares of the company through the stock market by starting an initial public offer (IPO) inviting the public to purchase its shares and raise additional capital. Once the company has met all of the requirements for filing Security Stock and Exchange (SEC) they are in compliance with SOX. Under SOX section 404, requires …show more content…

SOX is a legal framework developed by the United States with the aim of increasing the accountability and transparency of listed companies, especially pertaining to the cost of going public. Transparency is one of the advantages gained by a medium sized company that uses SOX to go public. Structures put in place through SOX monitor the internal systems of the company, prevent failure, ensure accurate disclosures and improves the management of risk of the company. This enhances the transparency of the medium sized company and increases its credibility among the public and potential shareholders (Kaserer, Mettler & Obernberger, 2011).

Going public with SOX also enhances the reliability of medium sized companies. The consumers and members of the public are able to predict the company’s behavior since the company publishes its accounts. Through transparency and improved public scrutiny, shareholders and other stakeholders such as customers are able to view the profit of the company, the prospectus and evaluate the ability of the company to meet their expectations in the future. The consumers can through public scrutiny develop confidence on the medium sized company going public via SOX, which increases customer base and profitability of the company (Litvak, 2007). Additionally, a medium sized company benefits from going public through SOX by enhancing investor confidence in the ability of the