Sox Market Failure

The Sarbanes-Oxley Act of 2002 (SOX), also known as the Public Company Accounting Reform and Investor Protection Act and the Auditing Accountability and Responsibility Act, was signed into law on July 30, 2002, by President George W. Bush as a direct response to the corporate financial scandals of Enron, WorldCom, and Tyco International (Arens & Elders, 2006; King & Case, 2014;Rezaee & Crumbley, 2007). Fraudulent financial activities and substantial audit failures like those of Arthur Andersen and Ernst and Young had destroyed public trust and investor confidence in the accounting profession. The debilitating consequences of these perpetrators and their crimes summoned a massive effort by the government and the accounting profession to fight all forms of corruption through regulatory, legal, auditing, and accounting changes.

The main objective of the Sarbanes-Oxley act was to reduce fraud. So far that objective seem to have been obtain. Since SOX was enacted, there has not been a major domestic corporate financial scandal uncovered other than the options back-dating scandal that occurred before July 2002 (Jahmani & Dowling, 2008). It is a tax advantage because companies and investors are not losing money.

The purpose of this memo is to provide you with information on the Sarbanes-Oxley Act of 2002 (SOX Act) and to describe the importance of its implementation, per your request. The SOX Act was first introduced in the house as the “Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002” by Michael Oxley on February 14, 2002. Paul Sarbanes, a Democrat U.S. Senator, collaborated with Mr. Oxley, a Republican US Senator, creating significant bipartisan support. The SOX Act was enacted by the end of July 2002 in response to recent corporate accounting scandals. The twin scandals that were impetus for the legislation involved the corporations of Enron and WorldCom.

In a recent article in the New York Times, Sarbanes-Oxley, Bemoaned as a Burden, Is an Investor’s Ally, by Gretchen Morgenson, is about some challenging the requirements that were put in place and the cost to the company’s. According to Morgenson, Tom Farley is one that is an outspoken critic of the law requiring outside auditor to attest on the management’s internal controls on the financial statements. He attributes the decline in corporations in the Unites States.

Sarbanes–Oxley, Sarbox or SOX, is a United States federal law which was introduced in 2002. It is also known as the “Public Company Accounting Reform and Investor Protection Act” and “and 'Corporate and Auditing Accountability and Responsibility Act”. The main objective of the act is to protect investors by improving the accuracy and reliability of corporate disclosures. New aspects are created by SOX act for corporate accountability as well as new penalties for wrong doings. It was basically introduced after major corporate and accounting scandals including the scandals of Enron, WorldCom etc so that the same kind of scandals do not repeat again.

The Sarbanes-Oxley Act of 2002 was implemented and designed to “protect the interests of the investing public” and the “mission is to set and enforce practice standards for a new class of firms registered to audit publicly held companies” (Verschoor, 2012). During the early 2000 's, the world saw an alarming number of accounting scandals take place resulting in many corporations going bankrupt. Some of the major companies involved in these scandals were from Enron, WorldCom, and one of the top five accounting and auditing firms, Arthur Andersen. These companies were dishonest with their financial statements, assuring the public the company was very successful, when in reality they were not. This became a problem because if the public believes a company is doing well, they are more likely to invest in it. That is to say, once these companies were exposed, it caused a number of companies going bankrupt and a major mistrust between the public and the capital market. Consequently, the federal government quickly took action and enacted the Sarbanes-Oxley act of 2002, also known as SOX, which was created by the Public Company Accounting Oversight Board (PCAOB), and the Securities and Exchange Commission (SEC). Many have questioned what Norman Bowie (2004) had questioned,

The act identifies and assigns accountability to those who knowingly falsify documents and it clearly states the consequences for acting outside the defined standard, relating to corporate governance. Using case studies we will review how the passing of the Sarbanes-Oxley Act is helping to standardized a code of conduct and how it has increased the awareness of corporate responsibility. First, we will review the definitions of corporate governance, business ethics and corporate responsibility. Next, we will examine the effectiveness of the Sarbanes-Oxley Act, through a case study and identify possible challenges the Sarbanes-Oxley Act may face, as public demand for social responsibility increases. Finally, we will review proactive recommendations for provisions to key titles of the Sarbanes-Oxley Act. These provisions will accommodate the growing public demand for ethical and social responsibility.

A lot has been made, perhaps without justification, of the July 30, 2002 passage of H.R. 3763, The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley" or The Act). Having read the Act, I suspect that the great praise is unfounded. I intend to address three issues presented within the act. First, I will address stock options as considered (or neglected, as the case may be) by Sarbanes-Oxley. Second, I will address the creation of a Commission designed to oversee audits and corporate accounting practices, and the potential efficacy of this Commission. Finally, I will address the modifications to the Federal Sentencing Guidelines as it relates to corporate fraud.

The Sarbanes Oxley Act came to existence after numerous scandals on financial misappropriation and inaccurate accounting records. The nature of scandals made it clear there are possible measure that could be used to prevent future occurrence of financial scandals. And the existence and effectiveness of Sarbanes Oxley has caused

The development of the Sarbanes-Oxley Act (SOX) was a result of public company scandals. The Enron and Worldcom scandals, for example, helped investor confidence in entities traded on the public markets weaken during 2001 and 2002. Congress was quick to respond to the political crisis and "enacted the Sarbanes-Oxley Act of 2002, which was signed into law by President Bush on July 30" (Edward Jones, 1), to restore investor confidence. In reference to SOX, penalties would be issued to non-ethical or non-law-abiding public companies and their executives, directors, auditors, attorneys, and securities analysts (1). SOX significantly transformed the procedures in which public companies handle internal

The Sarbanes-Oxley Act (SOX) was enacted in July 30, 2002, by Congress to protect shareholders and the general public from fraudulent corporate practices and accounting errors and to maintain auditor independence.   In protecting the shareholders and the general public the SOX Act is intended to improve the transparency of the financial reporting.   Financial reports are to be certified by the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) creating increased responsibility and independence with auditing by independent audit firms. In discussing the SOX Act, we will focus on how this act affects the CEOs; CFOs; outside independent audit firms; the advantages and a

This paper provides an in-depth evaluation of Sarbanes-Oxley Act, which is said to be promoted to produce change in the corporate environment, in general, by stressing issues of public accountability and disclosure in the financial operations of business. It explains how this is an Act that represents the government's and the Security and Exchange Commission's concern in promoting ethical standards in terms of financial disclosure in the corporate environment.

Most importantly, markets gain interest based on various reasons where some include the core questions of social and political elements. However, questions emerge regarding the occurrence of market failures; the term “factors” is attributed to the various types of market failures. This paper will focus on answering these questions with in-depth emphasis on defining market failures as well as their various types (Keech and Munger 6). Additionally, it will help in determining how market failures pose a problem for the utilitarian defense of the economic theory of corporate social

Sarbanes Oxley (also known as SOX) is legislation passed by the United States Congress in 2002, in the wake of a number of major corporate accounting scandals. Enron, WorldCom, Tyco, and others cost investors billions when their stock prices collapsed. As a result of SOX, top management must separately certify the accuracy of financial Furthermore, consequences for fraudulent financial activity are much more severe. Also, SOX intensified the management role of boards of directors and the independence of the external auditors who review the accuracy of corporate financial statements. The primary changes caused the formation of the Public Company Accounting Oversight Board, the assessment of personal liability to auditors, executives and board members and creation of the Section 404, which recognized internal control events that had not existed before the legislation.

The Sarbanes-Oxley Act of 2002 (SOX) was enacted into law in 2002 in the wake of corporation financial reporting scandals involving large publicly held companies. SOX instituted new strict financial regulations with the intent of improving accounting practices and protecting investors from corporate misconduct. SOX requires corporate executives to vouch for the accuracy of financial statements, and to institute and monitor effective internal controls over financial reporting. The cost of implementing an effective internal control structure are onerous, and SOX inflicts opportunity costs upon an enterprise as executives have