Sarbanes-Oxley Paper

723 Words May 13th, 2008 3 Pages
Sarbanes Oxley Paper
The Sarbanes-Oxley (SOX) act was passed into law in 2002. It was created in response to major financial scandals that largely shook the public's confidence in corporate accounting practices. It was a significant response to improper record handling techniques. Under the law, corporate managers must assess whether they have sufficient safeguards to catch fraud and bookkeeping errors. There are consequences for not complying with the provisions of the act and there are certainly advocates and opponents of it. Price Waterhouse Coopers says "Without a doubt, the Sarbanes-Oxley Act is the single most important piece of legislation affecting corporate governance, financial disclosure and the practice of public
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This was considered an unprecedented level of accountability and would likely never have been possible without the public outcry from the scandals which made the act necessary.
Sarbanes-Oxley is "consistently called the broadest-sweeping legislation to affect corporations and public accounting since the 1933 and 1934 security acts, experts agree the resulting changes are just beginning" (Fass, A. 2003). While The Sarbanes-Oxley act has a great deal of support, it is not a perfect solution. Alan Greenspan once called for changes to part of it and in fact called one of its provisions a "nightmare". In addition, many companies have complained about what they consider to be the high cost and overhead needed to satisfy the SOX act's requirements. The main complaint about the act was the lack of specific details about what exactly was required. This along with the potential for fines and imprisonment led many companies to overspend on their SOX compliance initiatives. In response to these complaints, the Securities and Exchange Commission approved revised guidelines in 2007 that spelled out some of the rather vague requirements. "The challenge has been to find the right balance between financial reporting and efficiency in achieving it," the chairman of the SEC, Christopher Cox, said. The…