The Disadvantages of the Sarbanes-Oxley Act of 2002

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Sarbanes-Oxley Act of 2002 Introduction The many financial scandals of the late 1990s and the early 21rst century served as the catalyst for U.S. lawmakers writing and ratifying the Sarbanes-Oxley Act of 2002 (SOX). Originally written to avert financial scandals including Enron, Tyco and others, SOX quickly became an impediment to the growth of smaller firms especially, who did not have the staff available to meet complex, often ill-defined requirements (Griffin, 2007). The intent of this analysis is to define the disadvantages of the Sarbanes-Oxley Act and illustrate how its original intent has been lost in unclear direction and implementation. Analysis Of The Disadvantages Of The Sarbanes-Oxley Act Of 2002 Immediately after ratification of SOX, all publically-held companies were required to file a statement of compliance with the Securities and Exchange Commission (SEC). Besides the hundreds and in some cases, thousands of hours that companies invested in getting these initial statements of compliance filed, there was still widespread fraud occurring in publically-held companies begin regulated by the SOX Act (Hemphill, 2005). Unethical companies were able to time their reporting and also devise methods of reporting that still shielded their unethical accounting and finance practices, which made the initial efforts at SOX compliance mediocre in performance at best (Orin, 2008). Meanwhile the many ethical companies had to comply with these reporting requirements and

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