Sarbanes-Oxley Act (SOX) Essays

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In July of 2002, Congress swiftly passed the Public Company Accounting Reform and Investors Protection Act at the time when corporations like Arthur Anderson, Enron and WorldCom fell due to fraudulent accounting practices and bad internal control. This bill, sponsored by Mike Oxley (R-OH) and Paul Sarbanes (D-MD), became known as Sarbanes-Oxley Act (SOX).It sought to restore public confidence in publicly traded companies and their accounting practices, though the companies listed above were prosecuted on laws that were already in place before SOX. Many studies have examined the effects of SOX on corporations in the past eleven years. The benefits are hard to quantify and the cost are rather hard to estimate including the
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In terms of increasing independent directors in corporate governance, SOX directed the Securities and Exchange Commission (SEC) to adopt rules that prohibit listings of companies that did not have an audit committee. The audit committee must consist of independent directors, and if the committee is in place but did not have enough independent directors, it must add more independent directors to the board. In addition, at least one of the directors must be a financial expert as defined by the SEC.
As for the liability of officers and directors, SOX expanded the scope of their legal obligation by increasing penalties for violating securities law and creating new crimes for certain acts which included securities fraud, obstruction of justice, and false certification of financial statements. This part of the SOX act actually modified the current laws that had been in place by increasing the penalties associated with civil and criminal violation of securities law. It also requires that all compensation in terms of bonus or incentive-based compensation and profit that is earned by executive officers be returned to the company if these laws are violated.
To increase the disclosure requirement of publicly traded firms, the SEC requires that firms with a market value of $75 million or have to include a management assessment on the effectiveness of

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