Pros And Cons Of The Sarbanes-Oxley Act Of 2002
Sarbanes-Oxley Act of 2002
Student
ACC/561
June 8, 2015
Professor
Sarbanes-Oxley Act of 2002
Introduction The Sarbanes-Oxley Act of 2002 (SOX) was established after many corporate scandals such as Enron, WorldCom, and AIG cost investors billions of dollars. Financial fallout from these scandals reduced the American public 's trust in the economy. The enactment of SOX in 2002 holds corporations to higher standards in reporting financial statements to internal and external users. Even though the standards for SOX are still evolving, the new regulatory environment generated in its wake will now protect the public and the market from fraud within corporations. This paper will discuss the main aspects of the SOX Act, its imposed requirements …show more content…
This section captures corporate responsibility by mandating that each chief executive officer must submit a written statement along with each report to certify the report’s validity. Under Section 906, penalties for certifying a misleading or fraudulent financial report are $5 million in fines with an option to serve up to 20 years in prison (Spear, 2014).
Pros and Cons of the SOX Act Although the enactment of the SOX Act has received tremendous support, it is not without its fair share of detractors. Involved and cumbersome requirements cause confusion and frustration for companies attempting to comply with the Act more than a decade after its enactment. Companies and lawmakers alike have had difficulty over the years with the interpretation and compliance of the Act.
Another major contention of critics is that the cost of compliance far outweighs the benefits in an international marketplace. The reporting requirements of SOX are specific to businesses in the United States; international businesses do not have the same requirements. “Regulatory compliance opposes economic cost on organizations and can affect their competitive advantage” (Srinivasan, 2014, p. 44). Increasing the cost for American businesses decreases competitive advantage in the worldwide …show more content…
(2006). Sarbanes-Oxley Act Summary and Introduction. Retrieved June 6, 2015, from http://www.soxlaw.com/index.htm
Burns, J. (2004, June 21). “Is Sarbanes-Oxley Working?” Wall Street Journal, pp. R8–R9.
Hanna, J. (2014, March 10). The costs and benefits of Sarbanes-Oxley. Retrieved June 5, 2015 from Forbes.com: http://www.forbes.com/sites/hbsworkingknowledge/2014/03/10/the-costs-and-benefits-of-sarbanes-oxley/
Public Company Accounting Oversight Board. (2015). PCAOB oversees. Retrieved June 4, 2015 from http://pcaobus.org/Pages/default.aspx
Rouse, M. (2008, January). Sox Section 404 (Sarbanes-Oxley Act Section 404). Retrieved June 6, 2015 from http://searchfinancialsecurity.techtarget.com/definition/SOX-Section-404
Sox-Online.com. (2012). Sarbanes-Oxley Act Section 802: Criminal penalties for altering documents. Retrieved June 5, 2015 from http://www.sox-online.com/act_section_802.html
Spear, B. (2014, July 6). Section 906 of Sarbanes Oxley Act. Retrieved June 5, 2015 from http://www.ehow.com/about_6589998_section-906-sarbanes-oxley-act.html
Srinivasan, M. C. (2014). Assessing the impact of Sarbanes-Oxley Act on the logistics industry: an exploratory study. Transportation Journal, Volume 53, 44 –
Student
ACC/561
June 8, 2015
Professor
Sarbanes-Oxley Act of 2002
Introduction The Sarbanes-Oxley Act of 2002 (SOX) was established after many corporate scandals such as Enron, WorldCom, and AIG cost investors billions of dollars. Financial fallout from these scandals reduced the American public 's trust in the economy. The enactment of SOX in 2002 holds corporations to higher standards in reporting financial statements to internal and external users. Even though the standards for SOX are still evolving, the new regulatory environment generated in its wake will now protect the public and the market from fraud within corporations. This paper will discuss the main aspects of the SOX Act, its imposed requirements …show more content…
This section captures corporate responsibility by mandating that each chief executive officer must submit a written statement along with each report to certify the report’s validity. Under Section 906, penalties for certifying a misleading or fraudulent financial report are $5 million in fines with an option to serve up to 20 years in prison (Spear, 2014).
Pros and Cons of the SOX Act Although the enactment of the SOX Act has received tremendous support, it is not without its fair share of detractors. Involved and cumbersome requirements cause confusion and frustration for companies attempting to comply with the Act more than a decade after its enactment. Companies and lawmakers alike have had difficulty over the years with the interpretation and compliance of the Act.
Another major contention of critics is that the cost of compliance far outweighs the benefits in an international marketplace. The reporting requirements of SOX are specific to businesses in the United States; international businesses do not have the same requirements. “Regulatory compliance opposes economic cost on organizations and can affect their competitive advantage” (Srinivasan, 2014, p. 44). Increasing the cost for American businesses decreases competitive advantage in the worldwide …show more content…
(2006). Sarbanes-Oxley Act Summary and Introduction. Retrieved June 6, 2015, from http://www.soxlaw.com/index.htm
Burns, J. (2004, June 21). “Is Sarbanes-Oxley Working?” Wall Street Journal, pp. R8–R9.
Hanna, J. (2014, March 10). The costs and benefits of Sarbanes-Oxley. Retrieved June 5, 2015 from Forbes.com: http://www.forbes.com/sites/hbsworkingknowledge/2014/03/10/the-costs-and-benefits-of-sarbanes-oxley/
Public Company Accounting Oversight Board. (2015). PCAOB oversees. Retrieved June 4, 2015 from http://pcaobus.org/Pages/default.aspx
Rouse, M. (2008, January). Sox Section 404 (Sarbanes-Oxley Act Section 404). Retrieved June 6, 2015 from http://searchfinancialsecurity.techtarget.com/definition/SOX-Section-404
Sox-Online.com. (2012). Sarbanes-Oxley Act Section 802: Criminal penalties for altering documents. Retrieved June 5, 2015 from http://www.sox-online.com/act_section_802.html
Spear, B. (2014, July 6). Section 906 of Sarbanes Oxley Act. Retrieved June 5, 2015 from http://www.ehow.com/about_6589998_section-906-sarbanes-oxley-act.html
Srinivasan, M. C. (2014). Assessing the impact of Sarbanes-Oxley Act on the logistics industry: an exploratory study. Transportation Journal, Volume 53, 44 –