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Corporate governance defined as the system of rules, practices and processes by which a company is directed and controlled. Balancing the interests of the stakeholders is essential involves in a company, which include its shareholders, management, customers, suppliers, financiers, government and community. There are five major elements of corporate governance, which are, board commitment, good board practices, functional and effective control environment, transparent disclosure, and well defined shareholder rights. To prevent corporate scandals, fraud and the criminal liability of the organization, good executed corporate governance is important and must apply and respect in the organization. There have a relationship between corporate governance and internal control, for example, the more in corporate governance, the more of internal control in the organization and the less of fraud occur. One of the tasks and goals of the corporate governance is to ensure there have adequate internal control within organization to protect the organization from any conflicts for the benefits of

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Corporate governance in itself has no single definition but common principles which it should follow. For example in 1994 the most agreed term for corporate governance was “the process of supervision and control intended to ensure that the company’s management acts in accordance with the interest of shareholders” (Parkinson, 1994)1. Corporate governance code is not a direct set of rules but a self-regulated framework which businesses choose to follow. This code has continued to change in the past 20 years in accordance with what is happening in the business world. For example the Enron scandal caused reform in corporate governance with the Higgs Report which corrected the issues which were necessary. Although it does not quickly fix problems, it gives a better framework to

"People have said these things are starting to filter down to smaller, non-public companies, Banks are requiring different standards for corporate governance which has increased as a direct result of Sarbanes-Oxley. People have started talking about spending more for internal controls, software, having to hire more auditors and higher D&O [directors and officers] insurance." (Leport 2005)

In order to ensure effective regulation, the Sarbanes-Oxley legislation contains eleven sections that describe responsibilities of corporate boards (Engel, Hayes, & Wang, 2007). In case these responsibilities are not performed, criminal penalties are applied. The need for stricter financial governance laws created the global trend and such countries as Canada, Germany, France, Australia, Israel, Turkey and others also enacted the same type of regulations (Damianides, 2005). Today, the Sarbanes-Oxley legislation continues to play a fundamental role in the process of protecting the rights of investors and supporting a high level of investment attractiveness of the United States and companies that operate in the country. That is why this particular legislation can be considered as extremely benefiting for the national economy as well as investors.

Mexican Cornbread has been a staple food of the indigenous people of Mexico for centuries. It is impossible to put an exact date on the origins of the food but it is easily positioned well before the arrival of the North American European settlers. Another theory is that the bread was not made until the Europeans did show up with all of their cooking technologies. The bread is important to the people because it is very commonly eaten and the main ingredient corn plays a incredibly large role in their

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For the public traded companies in the United States, the Sarbanes-Oxley Act has approximately eleven different sections that these public traded companies must abide by. In addition, The Securities and Exchange Commission or the SEC also has a significant impact in the implementation of rules and requirements to abide by the law. As a result, top level management officers such as the Chief Executive Officer (CEO), Chief Operations Officer (COO), Chief Financial Officer (CFO), and the Board of Directors must now follow stricter laws enacted such as internal control, corporate governance, auditing rules, and other financial practices.

Investors in publically trading companies should be protected from fraud, corruption and the intentional misleading by corporate executives concerning corporate finances. The Sarbanes-Oxley Act was passed on July 30, 2002 for the purpose of protecting investors from the risk of deceitful accounting practices by corporations. This paper discusses the background of the Sarbanes-Oxley Act of 2002 to include the when and why; as well as the intentions and purposes, and the process. It further addresses the arguments for and advantages of the law and the disadvantages. Lastly, this paper will speak to the impact of Sarbanes-Oxley in 2017 and beyond; containing the lawsuits, SOX for Not for profits and foreign countries.

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The second journal article reviewed was Does SOX 404 Have Teeth? Consequences of the Failure to Report Existing Internal Control Weaknesses. The abstract discusses the different penalties companies could face if they do not follow the proper reporting requirements for Section 404 (SOX 404) of the Sarbanes-Oxley Act of 2002 (SOX). In addition, the abstract discusses that most companies only report their internal control material weaknesses when they have restatements.

The world has witnessed a series of corporate bankruptcies in the recent decades like Enron, Lehman Brothers Inc, Global Crossings, and Tyco in the USA; HIH in Australia, Parmalat in Italy, APP in Asia, and Islamic bank Ltd. of South Africa. These collapses have weakened and shaken the confidence of shareholders, debtors, governmental institutions, and other similar relevant stakeholders in corporate governance (CG) and the stock markets, and led to regulating many reforms and codes of best governance practices all over the world, to strengthen transparency and restore confidence in financial markets (Barros et al., 2013). For instance, after the financial failure of Enron and dissolution of Arthur Anderson; one of the five largest audit and accountancy partnerships in the world, U.S enacted the Sarbanes-Oxley act of 2002; France regulated the financial security law of 2003, as many other countries developed a set of regulations in the aftermath of huge corporate scandals. In Addition, the integration and globalization of financial markets also has given significance and highlighted the importance of CG as claimed by Srinivasan & Srinivasan (2011).

Risk assessment is the most basic function of internal control that helps companies to prevent risks. Risks are analyzed, considering possibility and influence, as a basis for determining how they should be dealt with, thus, those potential risks can be identified before financial losses occur (Feng et al., 2009). For example, a company purchases an advanced fire-prevention system including the smoke detectors and fire alarms. This control behavior can reduce the possibility of fire accidents that may destroy the company’s physical assets. Therefore, the system is worthwhile because it prevents the company suffering from the likelihood of fire and avoids financial losses. Internal control systems have been advocated as a mechanism for establishing high quality management (Altamuro et al., 2010). It is impossible to run companies without any risks. What managers need to do is to assess the possibility of the risk and take relevant measures to prevent it occurring. The model of risk assessment is applied to decide whether the control should be implemented. There is a tiny flaw of the internal control. From the example it can be seen that if the cost of purchasing the fire-prevention system surpasses the total value of the company assets, this kind of control will lose its significance. Internal control makes great contribution to reducing

This paper examined the cost-benefit of SOX, looking specifically at the potential for a lower cost of equity as a result of lower information risk. The findings indicate that, after controlling for other risk factors, firms with internal control deficiencies have significantly higher idiosyncratic risk, systematic risk, and cost of equity. Moreover, remediation of internal control deficiencies was found to result in statistically significant and economically important changes to the cost of equity (from 50 to 150 basis points). This study is important to my research since it supports the idea that effective internal controls are valued by the equity market with good reason.

Aside from an elaborate risk culture that is retrievable in COSO’s ERM, Allianz further relies upon three lines of defenses, which ERM neglects. ERM solely relies upon a holistic risk approach, whereas Allianz applies this holistic approach and then, breaks risk management responsibilities down into three core defense lines. Looking at the specific roles in Allianz’s risk-based culture, “the first line of defense” rests with business managers in local operating entities. They are responsible for both risk management and return generation in their business units. The “second line of defense” includes independent, oversight functions, including Risk, Compliance, and Legal, that aim to supervise the “first line of defense”. Audit forms the “third line of defense”. This last line of defense reviews Allianz’s corporate governance and risk-mitigation culture by performing quality reviews of risk processes and internal control tests on an ongoing basis.