Question - The SEC gave companies with market capitalization of up to $75 million until July 2007 to comply with Sarbanes-Oxley. "The internal-controls rule, required under the 2002 Sarbanes-Oxley law, has been criticized by corporations and business groups as costly and burdensome...Some of the most vociferous complaints have come from smaller businesses that say the rule squeezes their budgets and forces them to curtail hiring, slash spending on research and development, and consider moving work overseas."

1) Summarize the Sarbanes-Oxley requirements for reporting on internal controls.

2) Why are these requirements particularly onerous for smaller public companies?

3) Compare control, significant, and material deficiencies in internal controls? Why and how does Sarbanes-Oxley require disclosure of material weaknesses?

4) Do you think it likely that smaller firms will more often face internal control deficiencies and material weaknesses than larger firms?