Sample content Pros and Cons of the Sarbanes-Oxley Act Ashford University Fiscal Accounting & Analysis BUS 591 Pros and Cons of the Sarbanes-Oxley Act The Sarbanes-Oxley Act (SOX) was enacted in 2002. The key goal was to avoid future immoral business practices, for instance avoiding accounting scams such as Enron and Tyco, by increasing fiscal revealing (Coates, 2007). The SOX needed companies to have higher standards and more precision while presenting fiscal reporting data (Cohen, 2008). The resulting consequence may be seen as having both good and bad aspects. In this article, main components, criticisms, and possible economical repercussions arising from the SOX execution will be provided. The SOX has 2 important sections; section 404 and section 302. Section 404 is linked to the internal control evaluation by administration, and the accountability administration must maintain it justly. Section 302 is linked with company obligation of upholding correct fiscal stat

1. BUS 591 Week 5 Assignment
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Sample content
Pros and Cons of the Sarbanes-Oxley Act
Ashford University
Fiscal Accounting & Analysis BUS 591

2. Pros and Cons of the Sarbanes-Oxley Act
The Sarbanes-Oxley Act (SOX) was enacted in 2002. The key goal was to avoid
future immoral business practices, for instance avoiding accounting scams such as
Enron and Tyco, by increasing fiscal revealing (Coates, 2007). The SOX needed
companies to have higher standards and more precision while presenting fiscal
reporting data (Cohen, 2008). The resulting consequence may be seen as having
both good and bad aspects. In this article, main components, criticisms, and
possible economical repercussions arising from the SOX execution will be
provided.
The SOX has 2 important sections; section 404 and section 302. Section 404 is
linked to the internal control evaluation by administration, and the accountability
administration must maintain it justly. Section 302 is linked with company obligation
of upholding correct fiscal statements, and the way upper-management (CEO,
CFO, and so on.) are held responsible for statement material (Verleun, 2011).
Before the SOX, fiscal data might be easily changed to misinform shareholders.
Moreover, it would be more likely to see an organization take extreme risks too.
But, after the establishment of the SOX, it is now tough to misinform shareholders
with fiscal data. Likewise, it is less likely to see organizations take high risks when
gamblers are tracked directly to upper-management. For instance, a CEO would be
reluctant to take excessive risks knowing his/her job is being affected.
It is clear that complying with rigid fiscal policies would assist avoid future
accounting dishonesty. A lesser apparent advantage would be the renewed
investor confidence. The SOX provides more dependable fiscal data, which
shareholders can confidently use for long term business decisions. Ideally, the
SOX must benefit the economy also. With a more moral and reliable business base
it might be presumed that the SOX would even trigger the US economy, as
contrary to what would happen in an unregulated economy having a nonexistent
SOX. For instance, shareholders might be hesitant to think any fiscal statements
that would be disadvantageous for the economy.
Over 10 years since the enactment of the SOX, organizations are still working to
improve their fiscal revealing. For instance, Marriott is now presenting thorough
write-off information on the financial loans it provides hotels; General Electric offers
more facts on its income and operating profits for companies it owns; and IBM is
trying to present better breakdowns of revenue (Kimmel, Weygandt, & Kieso,
2011, pp. 190-191). The regrettable factor to the moderate profits of these
organizations is scope of benefit and past time. Over 10 years has elapsed and
big, well-known organizations have yet to learn the SOX. The painstaking

3. changeover for several organizations demonstrates how the lack of SOX direction
adversely imposes on the US economy.
It is typical to hear the SOX criticized since the lack of appropriate direction that
has been extremely expensive to many organizations. One instance of lack of
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