Effects Of Sarbanes-Oxley Act SOX Essay

The Sarbanes-Oxley Act of 2002 was created by Congress in response to financial scandals. There were several incidents which contributed to the need for legislature such as SOX. For purposes of brevity, the focus here will be on two of the largest financial scandals leading up to the passage of SOX, which are of those of Enron and WorldCom.

The government formulates various laws to achieve optimum utilization of resources in the public sphere. Sarbanes-Oxley Act is one of the numerous laws drafted to optimize resources utilization in public companies (McNally, 2013). The act seeks to attain maximization utilization of resources by entrenching accountability and transparency in the reporting of financial matters. To this end, this paper explores the effects of Sarbanes-Oxley Act on United States financial market.

The Sarbanes-Oxley Act, which will now be referred to as SOX, was enacted essentially to curb conflicts of interest, thus reducing the expectations gap. The expectations gap

The Sarbanes-Oxley Act of 2002 was passed by congress in 2002 and has been instrumental in protecting investor from fraud. The Act was passed to respond to the accounting malpractices of many corporations such as ENRON, who conducted many deceiving practices. It Is also known as the SOX Act and it required strict reform to improve financial disclosures from corporation to prevent fraud. This has been instrumental and has brought a higher level of accountability to companies.

The U.S. Congress passed the Sarbanes-Oxley Act in 2002 due to scandals like Enron, Worldcom, and Tyco in early 2000. This Act was to serve as protection for investors from corporate malpractice and to encourage employees to report misdeeds when discovered. This Act was placed into law to protect investors against scandals like these in the future. Each of the top executives of these organizations played extensive roles in the extortion of funds that left the investors and shareholders without any recourse.

The Sarbanes-Oxley Act was enacted in response to a series of high-profile financial scandals that occurred in the early 2000’s at companies including Enron, WorldCom, and Tyco that rattles investors’ confidence (Sarbanes-Oxley Act/SOX, n.d.). The Sarbanes-Oxley Act better known as SOX was drafted by U.S. Congressman Paul Sarbanes and Michael Oxley and was put forth to improve corporate governance and accountability (Sarbanes-Oxley/SOX, n.d.). Now, all companies must be governed themselves accordingly (Sarbanes-Oxley/SOX, n.d.).

The authors note that in general Sarbanes-Oxley has succeeded in its mandate. There have not been, for example, any of the corporate accounting scandals of the Enron or Worldcom type that occurred before the law came into effect. There have been scandals in business, and failures, but none fell under the auspices of Sarbanes-Oxley. The failures of AIG and Lehman Brothers did not occur because of accounting scandals but rather because of business failures of other types. The Bernie Madoff scandal has also been cited by some SOX opponents, but that did not occur with a public company and was therefore not under the auspices of SOX either.

This research paper endeavors to expose how the Sarbanes- Oxley Act of 2002 might have led to the accountability of holding corporate executives for their actions in the past and also in the future. The paper will examine and explore the genesis of the Sarbanes-Oxley Act as well as give details on the act’s relationship to the ethics of the institution and the persons who work and manage the institution. The paper also proceeds to discuss different corporations around the globe that have been endorsed with the Sarbanes- Oxley Act and their subsequent benefits and demerits as opined by different individuals. The paper shall prove to be a relevant tool for any administrator managing a public company. Anyone going through this

The Sarbanes-Oxley Act arose as a result of several corporate accounting scandals that became public in late 2001 and early 2002. These scandals involved many publicly traded companies such as Enron, which “boosted profits and hid debts totaling over $1 billion by improperly using off-the-books partnerships”; WorldCom, which “overstated its cash flow by booking $3.8 billion in operating expenses as capital expenses and gave founder Bernard Ebbers $400 million in off-the-books loans”; and Xerox, which “falsified financial results for five years, boosting income by $1.5 billion”, among a long list of others (Patsuris, 2002). In the book Revolutionary Wealth, Alvin and Heidi Toffler (2006) explain that “slowly changing regulatory and

Signed by President George W. Bush, the Sarbanes-Oxley Act became an official law in 2002. Like most laws, the Sarbanes-Oxley Act looked good on paper, but whether it is successful is determined by how it is implemented. To start, the purpose of the act is to prevent the possibility accounting scandals from happening again, so a big part of the act aims to implement stricter corporate governance, business compliance, and financial visibility to the public. Sections detailed with policies guide how firms need to oblige with the act. Those that support the act and favors strict implementations believe that it will “improved disclosure, transparency, and corporate governance, thereby reducing misconduct, perquisite consumption, and mismanagement

The year 2002 marked a critical time for many corporate businesses as it was known for one of the most infamous years in organizational scandal. The Enron debacle, Tyco, Adelphia, and WorldCom all were involved in some sort of corruption. These corporations misfortunate mishaps was the driving force for the implementation of ethical laws. One law in particular was the Sarbanes-Oxley Act (SOX). This law was enacted to help restore integrity and public confidence to the financial markets (Orin, R. 2008). The Sarbanes-Oxley Act is not a law that is new to the scene of corporate America, in fact in 1934 the Securities and Exchange Commission was introduced to help police the U.S. financial markets. As a result,

The Sarbanes-Oxley Act of 2002 was an act created by the PCAOB, passed by U.S. Congress in 2002 to prevent distortion or misleading accounting activities conducted by the corporation. The accounting profession was exercising ruling within the profession prior to the enactment of the law, the law enabled external and independent oversight (The Sarbanes-Oxley Act).

After major corporate and accounting scandals like those that affected Tyco, Worldcom and Enron the Federal government passed a law known as the Sarbanes-Oxley Act of 2002 also known as the Public Company Accounting Reform and Investor Protection Act. This law was passed in hopes of thwarting illegal and misleading acts by financial reporters and putting a stop to the decline of public trust in accounting and reporting practices. Two important topics covered in Sarbanes-Oxley are auditor independence and the reporting and assessment of internal controls under section 404.

After the economic disadvantages and corporate fraud of Enron, WorldCom as well as other corporations during the 21st century, the United States congress had developed the law to protect the public interest, which is known as Sarbanes-Oxley Act of 2002. SOX established the new accounting and auditing procedures and public oversight that includes enhanced civil and criminal penalties for SEC violations and criminal fraud (Article: Efficacy of the Sarbanes Oxley Act in Curbing Corporate Fraud). Moreover, during 2002, the Sarbanes-Oxley Act has also added whistleblower protections for those who inform securities violation investigations. This is, the act prohibits retaliation against whistleblowers that lawfully report corporate misdeeds. Companies

(2009). The Economic Benefits of the Sarbanes-Oxley Act? Evidence from a Natural Experiment (1st Ed.). Boston. Retrieved from http://fic.wharton.upenn.edu/fic/papers/09/0941.pdf