Q 2-44 Private companies are not under Sarbanes-Oxley. Why do some private compa

Question

Q 2-44 Private companies are not under Sarbanes-Oxley. Why do some private companies follow the law? Q 2-45 Indicate the two approaches to presenting con- solidated statements. Q 2-46 Describe how a company could be required to consolidate another company in which it has no or minor voting stock. Q 2-47 Consolidation rules are similar between coun- tries. Comment. Salaries Expense Salaries Payable $1,000 (increase) 1,000 (increase) Explain how the matching concept applies in this situation. Q 2-29 Why are adjusting entries necessary?

Explanation / Answer

2-44: Private companies are not under Sarbanes-Oxley (SOX), still they follow the law. This is because of several reasons. Firstly SOX helps private companies increase their level of compliance and internal controls through integration of data management, reporting and security. Secondly, the industry today is peer driven and if a private company is SOX compliant then the customers will see that as a key differentiator. This helps in increasing the competitiveness of a private company. Thirdly, as SOX recognizes the authority of FASB to consider accounting issues and evolving business practices and modify generally accepted accounting principles (GAAP), this will have a positive impact on accounting practices of private companies.

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