Sarbanes - Oxley Act of 2002 and the Effect on the Business Environment

2860 WordsMay 7, 200412 Pages
The Sarbanes - Oxley Act of 2002 is the most important piece of legislation since the 1933 and 34 securities exchange act, affecting everything from corporate governance to the accounting industry and much more. This law was in direct response to the failure of corporate governance at Enron, Tyco, and WorldCom. The Sarbanes - Oxley seeks to bring back the confidence in all publicly held corporations to the shareholders, while placing more responsibility on CEOs and CFOs for the actions of the corporation. "Sarbanes - Oxley is more than just another piece of legislation - it has become synonymous with a new culture of corporate accountability and reform1." The SOX, as it has come to be known, covers a myriad amount of corporate…show more content…
There are basically three important parts that a business must decide: whether they will/or will not comply with the act, and the costs of compliance. Some smaller public companies have decided to delist themselves as public companies rather than comply with Sarbanes. "I have no problem with these arguments because SOX compliance is costly, but SOX is also an opportunity for public corporation - and the non - profits, private companies, universities, etc., that voluntarily adopt its guidelines - to develop the controls and procedures that were not in place at Enron, WorldCom, Arthur Andersen, et al" (Ohaver 14). One thing that is important for many companies to realize is that the compliance with Sarbanes, may really not be as costly as one expected. Plus, many of the rules for compliance are consistent with proper accounting practices and disclosure that companies should have been doing all along. But, there will be increased costs as process, training and documentation are developed and implemented. Audit costs are the heaviest expenditure of SOX. Many experts believe that since the Sarbanes - Oxley Act has came into existence, audit costs are up 23% and that is only going to be a down payment on more to come (Downey). The additional audit costs can be attributed to the fact that many auditors are double and triple checking their work now, and also looking in

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