Question

Explain the virtues and limitations of the Sarbanes - Oxley Act

Answer 1

Sarbanes-oxley act of 2002 is a federal law that has been established for financial regulation for public companies. It has been created to protect the interest of shareholders and employees from fraudulent financial practices.

Benefits of sarbanes oxley act as follows -

A.this act has helped in improving performance of audits and strengthening of control structure.

B.sarbanes-oxley act has also help through centralised and automatic financial reporting which has been specified in section 302 and section 404.

C this act helps the companies in prioritising risk by embedding a unified and comprehensive risk management framework.

D. This acts also helps through disclosure of crucial information to the shareholders and protecting their Interest.

Limitations of sarbanes oxley act are as follows-

A. It has lead to increased audit fees as auditors are forced to be more accountable and their fees has gone up.

B.one of the biggest criticism of SOX act comes from small public companies who feels that it is a burden for them because it should have been contained to multinational and large corporations.