Sarbanes Oxley Act

Topics: Internal control, Enron, Finance Pages: 4 (1338 words) Published: October 30, 2012
Sarbanes-Oxley Act
The Sarbanes-Oxley is a U.S. federal law that has generated much controversy, and involved the response to the financial scandals of some large corporations such as Enron, Tyco International, WorldCom and Peregrine Systems. These scandals brought down the public confidence in auditing and accounting firms. The law is named after Senator Paul Sarbanes Democratic Party and GOP Congressman Michael G. Oxley. It was passed by large majorities in both Congress and the Senate and covers and sets new performance standards for boards of directors and managers of companies and accounting mechanisms of all publicly traded companies in America. It also introduces criminal liability for the board of directors and a requirement by the SEC (Securities and Exchanges Commission), the agency responsible for regulating the securities market in the United States. Supporters of this law argue that the legislation was necessary and useful, while critics believe it will cause more economic damage than it prevents. The first and most important part of the Act establishes a new agency private non-profit, "the Public Company Accounting Oversight Board," i.e., a company responsible for reviewing regulatory, regulate, inspect and penalize companies for audit. Act also refers to the independence of the audit, corporate governance and financial transparency. It is considered one of the most significant changes in corporate law, from the "New Deal" of 1930. Evaluate the effectiveness of regulations such as Sarbanes-Oxley Act over minimizing the corporate fraud and protecting investors and make one (1) suggestion for improvement.

Fraudulent activity and accountants being held responsible for their actions was something that the government thought was important to make sure there was no falsification and fraud happening behind closed doors so to ensure that ethical standards were met the Sarbanes Oxley Act was brought to legislature. This Act was enacted in 2002 which...
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