Sarbanes-Oxley Act Advantages And Disadvantages

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The Tax Advantages and Disadvantages of Sarbanes-Oxley The Sarbanes-Oxley is an Act passed by the U.S congress in the year 2002. Its main aim was to protect investors from exposure to fraudulent activities through accounting activities by United States corporations. Due to the increase in fraudulent activities by large corporationssuch as Enron Corporation at the turn of the 21stcentury, the United States congress passed the Act. However, this essay would identify the pros and cons associated with this Act. The Sarbanes-Oxley Act takes into account recent cases such as the multibillion fraudulent cases such as the Enron scandal that led to the fall of the …show more content…

The Act highlights the dangers of entrusting one firm to be in charge of both the auditing and tax services of a company. The Act takes defines the distinct relationship that the two parties in question ought to take into consideration to avoid issues of conflict of interest. However, the SOX Act has its fair share of disadvantages with regards to tax. Since the Act states that companies should do quarterly internal controls, many companies have problems in developing financial statements on time(Clark, 2012). Internal controls are independent to every department in an organization. Conducting internal controls on all relevant departments would translate to late submission of financial statements hence result to issues related to tax evasion. Similarly, the SOX Act directs corporations to conduct quarterly internal controls on all the policies and procedures that are associated with a company. Conducting such activities are expensive and this forces firms to cheap into their tight financial budgets to cater for the former. The resultant effects are that they incur more costs thereby affecting their net tax in every financial …show more content…

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