The Sarbanes Oxley ( Sox ) Act

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The Sarbanes-Oxley (SOX) Act was passed by Congress in 2002 to address issues in auditing, corporate governance and capital markets that Congress believed existed. These deficiencies let to several cases of accounting irregularities and securities fraud. According to the Student Guide to the Sarbanes-Oxley Act many changes were made to securities law. A new federal agency was created, the entire accounting industry was restructured, Wall Street practices were reformed, corporate governance procedures were changed and stiffer penalties were given for insider trading and obstruction of justice (Prentice & Bredeson, 2010). Tenet Healthcare Corporation, one of the largest publicly traded healthcare companies in the US at the time, was accused…show more content…
Not-for-profit companies are not mandated to follow SOX regulations but many choose to adopt changes so that they display good corporate governance practices and appear more legitimate. It is recommended that non-profit organizations voluntarily adhere to SOX provisions. According to an article in Healthcare Financial Management, a four-phased rationalization approach is recommended to implement and maintain voluntary SOX compliance (Bigalke & Burrill, 2007). This approach uses SEC guidance to test existing controls and test plans in the short term. The long term strategy is to implement automated controls and standardize processes and controls (Bigalke & Burrill, 2007). This approach is more feasible than implementing all changes at once. Research shows that mandating SOX requirements for non-profit organizations will reduce fraud and increase corporate governance. One of the goals of the SOX act was to create transparency. Many nonprofit organizations have adopted one or more provision from the SOX act (Nezhina & Brudney, 2012). Analysis shows that nonprofit organizations reap the following benefits when they adopt provisions related to SOX: • Increased understanding, effectiveness, and communication of the business processes • Weaknesses of internal controls were revealed • More effective risk management controls were established • Decrease in fraud • A more effective board of directors The benefits lead to more

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