Advantages and disadvantages of the sarbanes oxley act

The healthcare reform in the U. The Act was aimed at restoring investor confidence following the demise of Enron and Worldcom, failures occasioned by accounting frauds Louis, Apart from restoring investor confidence in the stock market, the Act aimed to improve corporate governance, enhance accuracy and reliability of financial statements, strengthen the role played by independent directors and enhance internal control systems Louis, ; Hermason, The act however has faced various criticisms for instance regarding the high cost of compliance that burdens small public entities and its potential to reduce risk-taking among American public entities thus reducing their competitiveness in the global economy Hermason,

Advantages and disadvantages of the sarbanes oxley act

The legislation was created in response to some of the corporate scandals, like Enron. This act has sparked some debate on whether it is a legitimate and helping the average consumer.

Pros of the Act One of the big advantages of this act is that companies are being held more accountable. There are specific rules about how the company must handle their accounting practices. The Sarbanes Oxley Act dictates what a company can, and cannot do.

This means that the accounting of the company will strive to be more accurate. With this legislation, investors should have a little bit more peace of mind. Before the act took effect, investors were starting to lose faith in the system. Many companies like Enron and WorldCom had purposely deceived their investors.

Investors did not know whether they could trust the information that was provided to them. The Sarbanes Oxley Act has helped investors feel comfortable with the information that is being distributed.

There is always the chance that somehow a company could misrepresent something, but the odds are reduced.

Advantages and disadvantages of the sarbanes oxley act

The accounting practices, and the individual behind the accounting are held responsible with this act. Another advantage of this legislation is that the individuals that are in charge of reporting financial information are being held accountable.

If they do not do their jobs properly, they will have to face the consequences.

Advantages and disadvantages of the sarbanes oxley act

The legislation put specific steps in place that have to be followed in order to avoid any type of consequences. Cons Even though this legislation as a major advantages, there are a few disadvantages.

The biggest disadvantage to this program is that it is costly.

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In order to comply with the rules that are set forth, companies have to pay large sums of money. Even though there are strict rules with this legislation, there is no guidance set forth as to how a company should implement these practices.

Every company had to come up with their own system and put it into place. In order to do this, the companies had to spend a great deal of money along the way.

As an investor, this can negatively affect you in the long run. When a company suddenly has a large, new expense to deal with, they are going to have to come up with the money from somewhere.Main Advantages and Disadvantages of Sarbanes-Oxley Act (SOX) – disadvantages On the disadvantages end, SOX compliance has been associated with various direct costs and indirect costs that could affect firm’s investment potential.

Jul 10,  · Sarbanes-Oxley has directly influenced the liabilities and responsibilities of Board of Directors, Corporate Executives, Auditors, Audit Committees, and Analysts. This paper intends to provide the advantages and disadvantages of Sarbanes Oxley Act particularly in relation to the tax benjaminpohle.com: E Writing Solutions.

Main Advantages and Disadvantages of Sarbanes-Oxley Act (SOX) – disadvantages On the disadvantages end, SOX compliance has been associated with various direct costs and indirect costs that could affect firm’s investment potential.

Mar 10,  · Widely deemed the most important piece of security legislation since formation of the Securities and Exchange Commission in , the landmark Sarbanes-Oxley Act of was born into a climate still reeling from the burst of the high-tech bubble and fraud scandals at Enron and WorldCom.

How can the answer be improved?Tell us how. The Sarbanes Oxley Act is a piece of legislation that was enacted in The legislation was created in response to some of the corporate scandals, like Enron. The legislation was created in response to some of the corporate scandals, like Enron.

6 Pros and Cons of the Sarbanes-Oxley Act | Flow Psychology