Sarbanes Oxley Act

3116 Words Feb 11th, 2011 13 Pages
Executive Summary: Financial reporting has been dissected over and over again by legislation. The U.S. Securities and Exchange Commission (SEC) hold the key to providing protection and integrity when companies are submitting their financial statements. Although their mission is to provide order and efficiency for financial markets, insidious plans are still developed by companies which ultimately result in turmoil to the economy. To provide a safeguard to investors, the Sarbanes-Oxley Act (SOX) was passed by congress in 2002, which was constructed because of fraudulent acts of well-known companies such as Enron. Before the SOX was inaugurated, two sets of accounting rules were used as guides for CPA firms. These two practices were …show more content…
Management overrides, employee collaboration and the option of corrected financial statements also leave open the possibility of fraud. So long as the legitimacy of a process requires the integrity of management and company personnel to properly function, fraud remains a possibility.

Main Advantages and Disadvantages of SOX
Ethics played a big rule or rather the lack thereof played a big role in the formation of SOX. When faced with ethical decisions many “gatekeepers” hopped to go the other way. There are advantages and disadvantages that exist with SOX as with all new law. Clearly, there are no easy fixes or one size fits all solutions to the issues that plaque the financial world but SOX makes an attempt at eradicating or lowering the occurrence of fraud. Many would agree that this is one of “the most far reaching laws since the Securities and Exchange Act of 1934” (Jahmani and Dowling, 2008, p. 56). Some advantages of SOX cited by Jahmani and Dowling are as follows: restoring public confidence in capital markets, strengthening corporate accounting controls, standardized key financial processes, elimination of redundant Information Systems, better internal controls, clarify the relationship between auditing firms and public companies, increased independence between board of directors and management, and increased

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