Pros And Cons Of The Sarbanes-Oxley Act

856 Words4 Pages
The Sarbanes Oxley Act Subsequent to different corporate scandals that took place in the United States relating to different corporations such as Enron, WorldCom, Tyco, etc., the government of America endorsed the Sarbanes-Oxley Act in the year 2002. Generally acknowledged as one of the mainly noteworthy market reforms since the passage of security legislation of 1930, this law is intended to guard investors against accounting frauds and different financial malpractices and bring back their confidence by focusing on bringing truthful, reliable and transparent financial reporting and disclosure and reinforce the value of business ethical principles. This act is planned with an intention to formulate the strict standards against all US publicly…show more content…
The consequences for failing to meet the terms with certain requirements range from fines to detention. The Main advantages of SOX Section 301: Public Company Audit Committee requires the audit committee to work on the guidelines presented by SOX addressing the auditor’s autonomy and the relationship between auditors and the public company they audit. The section 302 has received the most interest of all the SOX regulation. Section 302 deals with the corporate responsibility for financial reporting. It establishes liability for CEOs and CFOs for approving statements that hold deceptive information concerning the financial condition of the firm. In practice this means that both the CEO and CFO of a public firm have to take accountability for the content of the financial report and sign for this, so this is one of the most important feature which affect the financial reporting of the…show more content…
Conformity with SOX enforces major costs, creating sizable incremental workloads, a higher quantity of official procedure, huge cash expense, and the concern of a new governmental bureaucracy. Companies’ burden by initial compliance costs has reduced investment in important areas of competitiveness such a research and development areas and capital expenditure. Improvement of internal control systems consumes much of the fixed costs which could be overcome by group effort among employees therefore consequential in inefficacy of SOX as a fraud prevention
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