1. What is the issue?
2. Evaluate the process that PacSun went through to comply with SOX, and particularly Section 404. Was that process as effective and efficient as it could have been?
3. Are the "significant deficiencies" that were identified in each of the two years of the audit evidence of control system flaws or largely irrelevant technical violations? In other words, should disclosure of these deficiencies have had a negative effect on PacSun's stock price?
4. PacSun executives seem convinced that the costs of complying with SOX were greater than the benefits to the company. Why did PacSun not benefit from the compliance process to the same extent as some other companies? Or were their compliance costs too high? Reference : Case study Pacific Sunwear of California, Inc.