Sarbanes Oxley Act

537 Words2 Pages
bulb-icon

Recommended: Sabanes oxley act

Praises and Criticisms
Whenever a new bill of legislation is signed into law, there will always be criticisms and praises of the legislation. Some will argue the new legislation is doing an effective job and fulfilling its intended purposes. On the other hand, some will argue the new legislation creates new costs to society, both financially and socially. In the case dealing with the Sarbanes-Oxley Act of 2002, the new legislation received scrutiny from many, while others felt the Sarbanes-Oxley Act successfully complete its intended goals.
As noted earlier, the main purposes of the Sarbanes-Oxley Act was to restore investor confidence in publically traded companies in addition to preventing any large future fraud scandals from occurring as they had prior to the enactment of the Sarbanes-Oxley Act. Amongst the sources who praised the Sarbanes-Oxley was The Financial Executives International. In 2007, the Financial Executives International conducted a survey of 185 to research the effects of the enactment of the Sarbanes-Oxley Act. These studies concluded that 50.3% of the companies believed the accuracy of their financial reports has increased while 56% believed that these reports are more reliable. Amongst the 185 companies, 43.6% of them stated that they felt the Sarbanes-Oxley provisions helped reduce fraud and 69.1% of the companies stated that investor confidence has increased in their financial reports (financialexecutives.org). For example, the new provisions of the Sarbanes-Oxley led to the discovery of the fraudulent scandal involving Value Line. When a manager was required to sign the company’s Business Code of Ethics, he realized fraudulent activity and reported it. Without the Sarbanes-Oxley Act, this act o...

... middle of paper ...

...d by the Sarbanes-Oxley Act. These provisions also pushed domestic public companies and other foreign companies to enter foreign stock exchanges, such as the London Stock Exchange (Luez, 147). Some sources argue the financial crisis of 2007 could be linked to the Sarbanes-Oxley Act. In result of strict regulations of the Sarbanes-Oxley Act, there was a lack of Initial Public Offerings (IPOs). The New York Stock Exchange began to weaken, causing an economic downturn (business.laws.com). From these criticisms, it is hard to tell whether or not the positive effects and praises of the Sarbanes-Oxley Act outweigh the harsh criticisms and negative effects.
Section 302
The third title out of eleven of the Sarbanes-Oxley Act is entitle Corporate Responsibility. This title increases the responsibility of Senior Executive to ensure the corporate financial records are

Show More
Related

  • Case Study Of Ligand Pharmaceuticals

    797 Words  | 2 Pages

    The specific obligations in this case would include monitor corporate governance activities and compliance with organization policies, and assess audit committee effectiveness and compliance with regulations

    Read More

  • Internal Controls and the Sarbanes-Oxley Act

    782 Words  | 2 Pages

    A Guide to the Sarbanes-Oxley Act of 2002 (2006). Retrieved December 16, 2009 from www.soxlaw.com

    Read More

  • Sarbanes-Oxley Act (SOX)

    1765 Words  | 4 Pages

    Zhang, I. X. (September 01, 2007). Economic consequences of the Sarbanes-Oxley Act of 2002. Journal of Accounting and Economics, 44, 74-115.

    Read More

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

    174 Words  | 1 Pages

    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.

    Read More

  • Between a Rock and a Hard Place: The Erosion of Privilege and the Duty of Confidentiality

    2032 Words  | 5 Pages

    A possible flaw of Sarbanes-Oxley is it failed to put up any resistance in thwarting the financial crisis. While the degree to which fraudulent behavior can be traced to the roots of the Great Panic of 2007 will likely be up for eternal debate, it might be telling that Sarbanes-Oxley effectively did nothing. It seems this could indicate that stronger incentives for whistleblowers (such as Dodd-Frank and perhaps other whistleblower protection regimes) are very necessary given the extreme social costs. This conclusion may be hasty, however, given the short time period between the enactment of Sarbanes-Oxley and the crash. Not only is the status of Sarbanes-Oxley still in flux over a decade later, but one has to consider the substantial learning and switching costs associated with a regime with such a substantial ruach. Certainly, this is not to say that additional protections may in fact be necessary given the putative reluctance of lawyers to report fraud, but Sarbanes-Oxley likely needed more time to really crystalize and provide some level of predictability before it can be declared a bust.

    Read More

  • The Dodd-Frank Wall Street Reform and Consumer Protection Act

    1575 Words  | 4 Pages

    The Dodd-Frank Wall Street Reform and Consumer Protection Act brought the most significant changes to financial regulation in the United States since the reform that followed the Great Depression. It made changes in the American financial regulatory environment that affect all federal financial regulatory agencies and almost every part of the nation’s financial services industry. Like Glass-Steagall, the legislation passed after the Great Depression, it sought to regulate the financial markets and make another economic crisis less likely. Banks were deregulated in 1999 by the Gramm-Leach-Biley Act, which repealed the Glass-Steagall Act and essentially allowed for the excessive risk taken on by banks that caused the most recent financial crisis. The Financial Stability Oversight Council was established through the Dodd-Frank Wall Street Reform and Consumer Protection Act and was created to address the systemic risks in the United States financial system and to improve coordination among financial regulators.

    Read More

  • Accounting Fraud, the Investor and the Sarbanes Oxley Act

    1981 Words  | 4 Pages

    Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur. To ensure proper accounting standards have been used Sarbanes Oxley also requires that public companies be audited by accounting firms (Livingstone). The problem is that the accounting firms are also public companies that also have to look after their bottom line while still remaining objective with the corporations they audit. When an accounting firm is hired the company that hired them has the power in the relationship. When the company has the power they can bully the firm into doing what they tell them to do. The accounting firm then loses its objectivity and independence making their job ineffective and not accomplishing their goal of honest accounting (Gerard). Their have been 379 convictions of fraud to date, and 3 to 6 new cases opening per month. The problem has clearly not been solved (Ulinski).

    Read More

  • Causes and Impact of the 1929 Great Depression

    1137 Words  | 3 Pages

    After the crash reform acts were put into place to once more stabilize the market. The first step was the formation of the Securities and Exchange Commission or the SEC. The role of the SEC was to lay down the market regulations and enact discipline in case of any infringement of said rules. Secondly the Glass-Stegall Act was passed. The Glass-Stegall Act states that the investment and the commercial banks could no longer have any involvement.

    Read More

  • The Legal, Ethical, and Ethical and Technological Concerns

    689 Words  | 2 Pages

    The securities Act of 1933 has basic objectives, to require investors to receive financial and o...

    Read More

  • Essay On The Stock Market Crash Of 1929

    1185 Words  | 3 Pages

    In Conclusion, although the stock market crash created a terrible place in american history, the crash also strengthened the nation for the future. The government was now regulating the market, and put in new legislation for future depressions, or recessions. After these pieces such as the glass steagall banking act were recalled, history repeated itself, as the stock market once again had a similar fall in 2008. With these regulations in place, the stock market, and the economy could be much more secure for future decades. The Stock Market Crash of 1929 should be an example for the future, showing that history in fact repeats itself.

    Read More

  • Remembering the Frauds at Enron and WorldCom

    2739 Words  | 6 Pages

    "This is why the market keeps going down every day - investors don't know who to trust," said Brett Trueman, an accounting professor from the University of California-Berkeley's Haas School of Business. As these things come out, it just continues to build up"(CBS MarketWatch, Hancock). The memories of the Frauds at Enron and WorldCom still haunt many investors. There have been many accounting scandals in the United States history. The Enron and the WorldCom accounting fraud affected thousands of people and it caused many changes in the rules and regulation of the corporate world. There are many similarities and differences between the two scandals and many rules and regulations have been created in order to prevent frauds like these. Enron Scandal occurred before WorldCom and despite the devastating affect of the Enron Scandal, new rules and regulations were not created in time to prevent the WorldCom Scandal. Accounting scandals like these has changed the corporate world in many ways and people are more cautious about investing because their faith had been shaken by the devastating effects of these scandals. People lost everything they had and all their life-savings. When looking at the accounting scandals in depth, it is unbelievable how much to the extent the accounting standards were broken.

    Read More

  • Analysis of the Enron/Arthur Anderson Scandal

    1550 Words  | 4 Pages

    Sarbanes-Oxley Act of 2002 (SOX), Pub. L. No. 107-204, 116 Stat. 745 (codified as amended in scattered sections of 15 U.S.C.)

    Read More

  • The Securities And Exchange Commission

    537 Words  | 2 Pages

    During the 1920s, approximately 20 million Americans took advantage of post-war prosperity by purchasing shares of stock in various securities exchanges. When the stock market crashed in 1929, the fortunes of many investors were lost. In addition, banks lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a “run” on the banking system caused many bank failures. After the crash, public confidence in the market and the economy fell sharply. In response, Congress held hearings to identify the problems and look for solutions; the answer was found in the new SEC. The Commission was established in 1934 to enforce new securities laws that were passed with the Securities Act of 1933 and the Securities Exchange Act of 1934. The two new laws stated that “Companies publicly offering securities must tell the public the truth about their businesses, the securities they are selling and the risks involved in the investing.” Secondly, “People who sell and trade securities must treat investors fairly and honestly, putting investors’ interests first.”2

    Read More

  • Corporate Accounting Fraud

    1084 Words  | 3 Pages

    This all happened under the watchful eye of an auditor, Arthur Andersen. After this scandal, the Sarbanes-Oxley Act was changed to keep into account the role of the auditors and how they can help in preventing such scandals.

    Read More

  • Finance Course Reflection

    2036 Words  | 5 Pages

    Financial crises have influenced the os of financial markets in past. The most important the Great Depression in 1929-30, the 1970s inflation failures and the banking difficulties in the 1990s led to problems in the financial markets causing serious disturbance. The recent financial crisis which became known in 2007, though the roots were implanted much earlier, has been the worst situation financial markets have ever faced.

    Read More

More about Sarbanes Oxley Act

Open Document