Pacific Sunwear

799 WordsOct 27, 20124 Pages
Case study for seminar work -Pacific Sunwear of California, Inc. 1. Discuss the different types of control that SOX implies for PacSun; what action, results, personnel and cultural controls are used? Action control: Section 302 of SOX required both the company’s CEO and CFO to personally certify the “appropriateness of the financial statements and disclosures contained in the periodic report”. PacSun top management required their subordinates to share the certification responsibility. Through this responsibility sharing, the whole organization is engaged in this certification requirement. Results control: Section 404 dealt with internal controls over financial reporting (ICOFR)-the processes that are designed to ensure the…show more content…
With the SOX, the company has always been in a tight control state. Cost: The cost to PacSun of SOX compliance was significant. In FY 2004 the total cost of compliance-financial statement audit and 404 compliance- was an estimated $2 million, in year two, the costs declined by almost 40%. There are also implicit costs, for example, SOX had made it more burdensome to serve on the Audit Committee. The meetings with the Committee were frequent and time-consuming. Also added to the costs are training programs for SOX. Lots of unneeded documentation were created. 3. The SOX act isn’t only for the companies as such, but also to protect investor’s money. From this perspective, is SOX adding value in this case? SOX mandated an evaluation of the effectiveness of a company’s internal controls by both management and the company’s external auditor and formal written opinions about the effectiveness of those controls. In doing this evaluation, managers and auditors are required to examine a broad range of internal controls over financial reporting. The existence of a single material weakness requires managers and auditors to conclude that the company’s internal controls are not effective. SOX has had positive effects on both the quality of financial reporting and the quality of firm’s MCS. With SOX, the accuracy and reliability of corporate disclosures are improved. Also the federal government continues to refine SOX

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