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I chose J-SOX as compared to SOX. J-SOX is part of Financial Instruments and Exchange Law implemented in Japan. Its main function is to define the requirements and obligations of internal control over financial statement. Besides Sarbanes Oxley legislation, several incidents was directly connected to the creation of J-Sox. For instance, cosmetic maker Kanebo admitted its accounting fraud in 2005, inflating its profit by 2 billion dollars in 5 years. Its audit firm, Â ChuoAoyama, PwC's affiliate, was suspended for involving in accounting fraud. Another catalytic incident happened in 2006; Liverdoor, one of internet service provider in Japan, was found falsified in its financial statement trough complicated manipulation and stock swap merger. After the scandal was revealed, not only its stock price slumped immediately, but also caused the price of other similar companies to fall dramatically. Eventually, Liverdoor was delisted from Japanese stock market, and some of companies' executives were sentenced to jail. To prevent such incidents from happening over and over again, Japanese government felt the need for legislation about internal control was inevitable. The law was passed in 2006 and became effective on April 1st, 2008.
Discuss 3 similarities between the legislation and SOX. (30 points)
Since J-SOX is generally based on the framework of SOX in the U.S, there are numerous similarities between these two legislations, including:
Enhance the finance disclosure of the company
In both legislation, the ultimate goal is to be more accurate in the financial statement by enhancing the internal control within the company, they both regulates what information is necessary to put in the annual financial report such as basic framework of internal control and certification from CEO and CFO.
increase the penalty of crime
Both legislations took the same approach in dealing with fraud action by increasing the penalty of crime. Under SOX, the section IX is all about the penalty enhancement of white collar crime, For example, the maximum penalty for mail and wire fraud increased from 5 to 10 years  . As for J-SOX, such enhancement was enforced too in hope of reducing the potential fraud in the future. For example, the maximum imprisonment for inside trading have increased from 3 years to five years, the maximum fine for individual also raised from JPY 3 million to JPY 5 million.
(3)Auditing of internal control
There are many similarities in its regulation on auditing of internal control. First, both legislation adopt integrated audit, which means that auditors must provide opinions on the effectiveness of companies' internal control besides opinion on the financial statement. Also, external editors may use the result created by internal auditors as long as the content is correct and effective.
Discuss 3 differences between the legislation and SOX. (30 points)
J-SOX was enacted in 2008, which is way behind than SOX was (enacted in 2002). In spite of this, we can see J-SOX as a modification or a broaden version law of SOX. It took criticisms of SOX into account and used risk-based, top-down approach to implement the law. Also, Since SOX was legislated in the U.S, where culture, business environment and legislation system are not the same, J-SOX needs to implemented in a way that can be fitted in the Japanese business environment. Primary differences includes:
Internal Controls on Information Technology
Under SOX, there is no specific regulation or guidance which defines how IT should be used properly to support the work of internal control. However, Under J-SOX, it clearly states that how company should response to IT since it has became an essential part of the business operation; In "Standards for Management Assessment and Audit concerning Internal Control Over Financial Reporting"  (an implementation guidance to J-SOX) section I, part 2, it provides insight on how company can benefit from IT, and what potential risk can be aroused by it, how. For example, company can use an inventory tracking system to ensure that inventory meet the need from the clients. On the other hand, the system could be maliciously altered and cause lost in profit.
Difference on the definition of deficiencies
Under SOX, the deficiencies on internal control are classified as three different types- control deficiency, significant deficiency and material weakness.
However, Under J-SOX, it only defines two types of deficiencies- deficiency and material weakness. Moreover, it define a suggest threshold to identity material weakness in business; if the misstatement in financial report exceed 5% of pre-tax income, it is considered a material weakness and need to report to the management.
Information needed to be revealed to the public
Under J-SOX, it further broadens the scope of information need to reveal to the public. It is not only limited to the financial statement described in the SOX, which only requires annual, quarterly financial reports and its footnotes to be revealed (section 302, section 404). Besides requirement Under SOX, Securities reports needs be to be disclosed (Section 24-4-2) Under J-SOX.
Do you think these legislations are good for business and investors? (30 points)
I think SOX has some negative impact on business, mainly because now they would need pay for extra cost to comply with the law. According to a survey by Korn/Ferry International, on an average, companies need to spend 5.1 million per year in order to meet the requirement of SOX  . Compared to large-scale business, the costs for small-scale business are even higher, since most large companies already have a relatively complete accounting process/system. But for small-scale business, they have to start from the bottom - they need to conduct new business process, IT infrastructure and internal control system. According to a research by GEO (Government Accountability Office), 84% of companies that went private from 2004 to 2005 had revenue of $100 million or less. 
When Japan first introduced the J-SOX legislation, some small-scale companies think that they must set up independent audit system as other big companies do. Actually, J-SOX design different requirements for mid-size and small-scale companies, as FSA (Financial service agency) explains:""small and medium size companies are allowed to design a simplified system taking account their respective situation, such as business size and characteristics. In terms of mitigating cost for small business, J-SOX actually does a better job than SOX.
I think both SOX and J-SOX are good for investors because companies need to be transparent and accurate in its financial statement, investors now can be more confident about the financial report and can decide whether they should invest the company based on the report. Another crucial benefit of SOX and J-SOX is that it ensures that auditors of company cannot provide non-audit services for the company. This ensures the auditor independence and avoid the conflict of interest that often happened in the past. Furthermore, the legislations requires CEO and CFO of company to certify for their financial report. This urge them to work for the "interest of shareholder" rather than "interest of themselves". Also, now they have the liability to examine the correctness of financial report and cannot just walk away from it when a misleading report is found.