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The Pros And Cons Of The Sarbanes-Oxley Act

860 Words4 Pages

In 2002, Paul Sarbanes and Michael Oxley came together to present the Sarbanes-Oxley Act of 2002 (SOX), changing the business world forever. Although SOX was passed over a decade ago, continuous debates remain on numerous faucets surrounding this piece of legislation. The legislation has created extreme feelings and controversy regarding the advantages and disadvantages for public organizations. Along with the passing of SOX, the Public Company Accounting Oversight Board, (PCAOB) was established to oversee and regulate the new changes for public organizations. Discussed below are some of the advantages and disadvantages SOX has prompted since it was passed.
Advantages
Despite the initial stigma surrounding the change SOX would require, some …show more content…

Accounting departments and divisions are now able to enhance tax planning and restructuring. By restructuring, “duplicative processes have been identified and eliminated, increasing efficiency and effectiveness, also, increased improvement in the efficiency of both internal and external audits, thereby decreasing audit costs” (Basile, Handy & Fret, 2015, p. 586). The regulations and approval demanded by the PCAOB have given new accountability and accuracy back to accountants that fraudulent scandals had …show more content…

As SOX matures over the years, and implementation has streamlined, decreasing cost make this change more acceptable. However, for the small business, SOX has been a tough adjustment. With no plan on how to implement the new regulations, companies were forced to waste countless man hours and dollars on streamlining a process that works. “The legislation is broad on requirements and short on specificity” (Murphy & Topyan, 2005, p. 86). The failure to specify implementation was an unfair disadvantage for almost all med-sized to smaller businesses. The small business owner is not in possession of this much disposable income to adhere to proper regulations. With added direct and indirect cost, taxes and fees paid would bankrupt smaller businesses. Five years after the passing of SOX, the U.S. Senate agreed, “that small businesses play a critical role in the economy, and that the SEC and the Public Company Accounting Oversight Board (PCAOB) should implement Section 404 of the Sarbanes-Oxley law in a manner that limits the burdens placed on small and mid-size public companies” (Iliev, 2010, p. 1164). With this necessary change, SOX has provided a much needed control on business of all

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