MAIN ADVANTAGES AND DISADVANTAGES OF THE SARBANES-OXLEY ACT (SOX) OF 2002
When the US Congress hurriedly passed the Sarbanes-Oxley Act of 2002, it had in mind combating fraud, improving the reliability of financial reporting, and restoring investor confidence. Perhaps SOX's most burdensome element was Section 404, which says that it is management's responsibility to maintain a sound internal control structure for financial reporting and to assess its effectiveness; and that it is the auditors' responsibility to attest to the soundness of management's assessment and report on the state of the overall financial control system. (Wagmer & Dittmar,2006)
The apparent motivation for the Sarbanes-Oxley Act was to combat the financial statement fraud problem that continues to plague the United States, as embodied by Enron, WorldCom, Global Crossing, and too many others. Simply stated, Sarbanes-Oxley takes direct aim at the perceived drivers of fraud by attempting to strengthen board and audit committee oversight, increase auditor vigilance and independence, strengthen internal controls and risk management, and create accounting fraud penalties with a significant deterrent effect (Boatright, 2004)
THE UPSIDE OF SARBANES-OXLEY/ADVANTAGES
In the Business and Professional Ethical journal, (Gorman, 2009) discusses the Advantages of the SOX Act below
Reduces disclosure process cost, enhance the productivity of internal controls management and increases investor confidence.
Investors can evaluate the process and performance of the management's stewardship responsibilities and the reliability of a company’s financial statements.
It Increases the responsibility of the management for the company's financial statement.
Improved disclosure helps businesses to detect fraudulent financial reporting earlier and minimizes its adverse effects. The increased quality and accountability of the financial reporting improves investor confidence, which ultimately results in...