Pros And Cons Of The Sarbanes-Oxley Act

According to the Federal trade commission, the FTC issued the Safeguards Rule, which requires financial institutions under FTC jurisdiction to have measures in place to keep customer information secure. On July 30, 2002, The Sarbanes–Oxley Act was created also known as the "Public Company Accounting Reform and Investor Protection Act" (Investopedia, 2014). Then the main purpose of the act is to protect shareholders from fraudulent representations in the financial statements which is why the act was passed by U.S. Congress in 2002. The act is to protect investors from the possibility of fraudulent accounting activities by corporations. However, there are a few disadvantages according to "Connect Us". One of the main disadvantages is that it is very costly to both small and large corporations with can result in higher audit fees. …show more content…
It can take a toll on the company's profit. However, using the Sarbanes-Oxley Act, I believe its the best appropriate approach and highly necessary safeguard because not only does it protect its investors by the shareholder as well from the possible misdeeds from financial managers. Another safeguard is the "The Securities and Exchange Commission". The SEC is an independent, federal government agency responsible for protecting investors, maintaining the fair and orderly functioning of securities markets, and facilitating capital formation (Investopedia,