Advantages and Disadvantages of Sarbanes Oxley Act

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The Sarbanes-Oxley (SOX) Act was enacted in 2002 after the Enron and WorldCom financial scandals. It was intended to protect the public as well as shareholders form fraud and accounting errors. The Act is administered by the United States Securities and Exchange Commission (SEC). The Act sets the rules and requirements in addition to setting the deadlines for compliance. Failure to comply with the set guidelines may result in fines or even imprisonment.
Tax Advantages of Sarbanes-Oxley
With the Sarbanes-Oxley Act, companies are now required to be more accountable for their actions. This is via such means as operating with clear accounting practices as well as maintaining high ethical standards in their transactions. When companies follow these guidelines as required by the Act, then they are able to provide transparent services and prevent cases of fraud (Coates, 2007).
Individuals who are responsible for creating and reporting financial information are required to be more accountable with the Sarbanes-Oxley Act and are therefore held responsible for their actions. Before, employees as well as executives were not held responsible for misleading shareholders and consumers. The Act provides for the steps this individuals are required to follow to avoid being accountable for inaccurate information that they may report (Hanna, 2014).
The Sarbanes-Oxley Act provides a basis for an internal environment that could be controlled in a better way. When companies are in a position to control their own internal finances in a proper manner, it leads to more accurate information being recorded and reported. As a result, this leads to better planning and investing for the companies and has also increased the faith of investors in the companies.
Tax disadvantages of Sarbanes-Oxley
The Sarbanes-Oxley Act is expensive for companies. This is because it requires a lot of resources in terms of money and labor in order to fulfill all the requirements of the Act. This expenses are handled by the companies which results in increased costs of running the business. As a result, the companies charge more for their products, a mo...