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Sarbanes-Oxley Act Pros And Cons

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SARBANES- OXLEY ACT: COSTS AND BENEFITS Introduction The purpose of this report is to provide information about the costs and benefits of the Sarbanes-Oxley Act (SOX). The Sarbanes- Oxley Act was enacted by the U.S. Congress in 2002, following corporate debacles and is described as the most sweeping corporate legislation since the Securities Acts of 1933 and 1934. It includes detailed provisions dealing with corporate governance and various auditing issues designed to help restore investor confidence. Preceding the enactment of the SOX, the failures of certain corporations due to financial scandals resulted in significant losses to investors and creditors. The SOX was introduced to address the issues of accounting malfeasance by attempting to improve transparency. The act was authorized in the wake of public disgust aroused by corporate scandals that lead to the collapse of major firms like Enron and WorldCom. The main objective of the act was to reinstate public confidence in corporate financial statements. It was aimed to increase the accountability of the board of directors to shareholders and to improve the accuracy and reliability of financial disclosures. …show more content…

Proponents of the act argue that the law was necessary to restore public faith and prevent another outbreak of accounting frauds. On the contrary, opponents argue the law is detrimental to the economy and particularly harmful to small firms due to the high implementation cost it imposes. Given the preceding, the report examines the cost and benefits associated with the implementation of Sarbanes-Oxley Act. The report is composed of four parts: (1) Summary of SOX and its requirements (2) Costs of SOX (3) Benefits of SOX (4) Conclusions and

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