Q1DC - Horngren'S Financial And Managerial Accounting

Question

Conduct an Internet search for information on internal control and the Sarbanes-Oxley Act. Write a report of your findings. In your account, discuss some of the advantages and disadvantages of the Sarbanes-Oxley Act. Present it to your class (if required by your instructor).

Step-by-Step Solution

Answer

Four main areas in which the Sarbanes-Oxley Act focused

• Increasing criminal punishment
• Accounting regulation
• New protections
• Corporate responsibility

Step 1: Definition of the Sarbanes-Oxley Act

The Sarbanes -Oxley Act is established in 2002. This act is established for auditing and the financial regulations of the company.

Step 2: Advantages of the Sarbanes-Oxley Act

1. The first advantage of the Sarbanes-Oxley is that it provides more accurate accounting. This act makes rules and regulations for the companies that make the companies’ accounting more accurate.
2. The second advantage of the Sarbanes-Oxley Act is that it gives more information to the companies. Because this act states that the companies’ financial statements must be accurate and no mispresent of the data is present in the financial statements.
3. The third advantage of the act is that the accountant is personally liable for any mispresent in the financial statements

Step 3: Disadvantages of the Sarbanes-Oxley Act

1. The first disadvantage of this act is that it includes high costs.
2. The second disadvantage of the act is that it negatively affects the profitability of the company because this act denied some criteria to decide the profitability of the company. This will negatively affect the profitability of the company