What Are The Pros And Cons Of The Sarbanes-Oxley Act

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In 2002, Congress passed the Sarbanes-Oxley Act (SOX) to strengthen corporate governance and restore investor confidence. The act’s most important provision, §404, requires management and independent auditors to evaluate annually a firm’s internal financial-reporting controls. In addition, SOX tightens disclosure rules, requires management to certify the firm’s periodic reports, strengthens boards’ independence and financial-literacy requirements, and raises auditor-independence standards. While the intention for the Act is clear but its ultimate effects continue to be debated. SOX proponents maintain that the act alleviates investor concerns by improving the transparency and accuracy of financial reports. Opponents are saying that compliance

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