Cons of the Sarbanes Oxley Act
June 05, 2013
Cons of the Sarbanes Oxley Act The Act that was passed by Congress was a much needed and strict business accountability measure that was designed to make it hard for business to defraud investors about corporate financial information. With this Act companies are experiencing higher audit fees and increased changing of financial executives.
Among the reasons for the need to revise the Sarbanes Oxley act is the huge increase in the cost of being audited. The higher priced audits are causing a lot of dislike between corporate officials, independent accountants, and members of the board. “In recent months, business groups led by the U.S. Chamber of Commerce have stepped up pressure on the SEC to ease some of the burdens of the law” (Johnson, 2005). The increase of the audit fees could cause small businesses to not be competitive or even have to close and be out of business altogether. “Many private companies and smaller public companies are realizing that the Big Four have designed their audits to serve the Fortune 500 companies and that this model is slow and expensive.” (Burczyk, 2007)
Small businesses are having many problems with implementing the Act into their reporting processes due to the costs that are involved with disclosure, changing and testing of internal controls and the reporting to both shareholders and the SEC. The Act was designed for the larger corporations and not the smaller business. The costs of the audits have been revised in the Act but they are still extremely high for smaller corporations.
With this Act it has driven many companies out of the United States and move overseas to do business due to the costs and restraints that have been put on corporations. “A Study that was conducted shows that the number of American companies deregistering from public exchanges has tripled during the year that SOX was enacted into law, while on the other hand, only a hand full of…