Ethical Dilemma: Enforcing the Sarbanes-Oxley Act
This paper examines an ethical dilemma faced by a controller of a medium-sized manufacturing company whose external auditors have recommended costly improvements to internal control systems in response to the Sarbanes-Oxley Act. The paper outlines the compliance challenges that SOX creates for small and mid-sized public firms, explains why changing auditors is unlikely to resolve the problem, and proposes constructive steps — including seeking legal counsel and identifying specific areas of non-compliance risk — that allow the company to respond prudently without blindly accepting or rejecting the auditors' costly recommendations.
- Introduction to the Ethical Dilemma: Controller faces costly SOX audit enforcement dilemma
- Compliance Challenges Under the Sarbanes-Oxley Act: SOX burdens small and mid-sized public firms
- Why Changing Auditors Is Not the Answer: All auditors tighten procedures under heightened regulation
- Recommended Steps for Resolving the Situation: Seek legal counsel and identify compliance gaps
✍️ How to write this paper — guide, tools & examples ▾
What makes this paper effective
- The paper grounds its ethical analysis in a concrete, realistic scenario, making the dilemma immediately relatable to accounting professionals.
- It avoids a simplistic either/or framing by explaining why the obvious "solution" — changing auditors — is actually counterproductive, strengthening the argument for the recommended course of action.
- The conclusion offers practical, actionable steps rather than vague advice, giving the paper clear applied value.
Key academic technique demonstrated
The paper demonstrates problem-solution reasoning in an applied ethics context. It first frames the ethical tension clearly, then uses cited evidence to disqualify the intuitive solution, and finally proposes a structured alternative. This technique — ruling out a flawed approach before advocating a better one — is effective in professional and business ethics writing because it anticipates and preempts the reader's most likely counterargument.
Structure breakdown
The paper follows a four-part structure: (1) an introductory scenario establishing the ethical conflict; (2) contextualization of the dilemma using scholarly sources on SOX's regulatory burden; (3) a rebuttal of the option to change auditors, supported by evidence about industrywide tightening of audit procedures; and (4) a prescriptive conclusion offering two concrete remedial steps. The paper is concise and well-focused, appropriate for a short undergraduate ethics assignment.
Introduction to the Ethical Dilemma
As the controller of a medium-sized manufacturing company, I have developed effective accounting and internal control systems. This has been achieved by keeping staff updated on changes in the accounting industry and diligently updating the systems to comply with new accounting standards. As a result, the company has been regularly commended for its thorough procedures by an external auditor who has been reviewing its books for more than a decade.
However, the enactment of the Sarbanes-Oxley Act has initiated several changes and additional work for the firm because it focuses on testing internal control systems. Based on their interpretation of the Act, the auditors have suggested costly improvements to the systems and expanded the scope of the audit engagement, which has contributed to increased fees. The partner in charge has stated that it is better to make mistakes in implementation rather than risk non-compliance, since the new legislation is open to interpretation.
This situation has produced an ethical dilemma rooted in the belief that the company is already in compliance with the legislation and may not need the costly improvements. The central ethical question is whether to change auditors because the current ones are too strict in enforcing the Sarbanes-Oxley Act.
Compliance Challenges Under the Sarbanes-Oxley Act
According to John and Marano (2007), the enactment of this legislation has resulted in numerous compliance challenges for both small and mid-sized public firms. These challenges are driven by the disproportionate and substantial regulatory burden associated with the Sarbanes-Oxley Act. Given the increased vulnerability to prosecution and shareholder lawsuits, external auditors typically conduct extensive testing of every internal standard and procedure in order to protect themselves from such exposure. Notably, this extensive testing is carried out regardless of its probable significant impact on the accuracy of financial statements.
Works Cited
John, David C., and Nancy M. Marano. "The Sarbanes-Oxley Act: Do We Need a Regulatory or Legislative Fix?" The Heritage Foundation, 16 May 2007.
McCarthy, Ed. "Tips for the Sarbanes-Oxley Learning Curve." Journal of Accountancy, American Institute of Certified Public Accountants, June 2004.
Always verify citation format against your institution’s current style guide requirements.