Sarbanes-Oxley Act Of 2002 Pros And Cons
Some of the pitfalls of the pre-Sarbanes-Oxley era were, in my opinion, no accountability for Chief Executive Officers (CEO) and other high level executives, the imposition of very small fines and no prison time for devastating frauds, and a lack of independence of external auditors and the board of directors. With this in mind, I believe five advantages of the Sarbanes-Oxley Act of 2002 to be:
1. That it holds CEO's accountable for internal controls so that they cannot claim that they did not know or understand what was happening in their company and place the responsibility for fraud on lower level staff (Section 302 and 404).
2. That it provides for disgorgement (Section 304), prison time and fines (Section 407). No one should ever be allowed …show more content…
To that extent, I believe SOX has accomplished its original intent. SOX forces Chief Executive Officers and Chief Financial Officers to take responsibility for their actions and be cognizant of internal controls. However, the economy was greatly affected by the frauds and the implementation of SOX, and has not really recovered. Overall, SOX has done little to increase investor confidence. Also, I am not sure how much of SOX is actually being enforced. The text ends with the publication of SOX and does not provide any additional information on the post-SOX era, which includes a 14-year span of time.
Since the biggest criticism of the Sarbanes-Oxley Act of 2002 (SOX) appears to be its costs, perhaps a provision should be added that addresses the costs to smaller public companies. As stated in question 12-4, it is difficult to determine the effect of SOX with no analysis of the last 14 years of implementation. A study should be conducted on the effects of SOX to determine if any of the existing sections should be
1. That it holds CEO's accountable for internal controls so that they cannot claim that they did not know or understand what was happening in their company and place the responsibility for fraud on lower level staff (Section 302 and 404).
2. That it provides for disgorgement (Section 304), prison time and fines (Section 407). No one should ever be allowed …show more content…
To that extent, I believe SOX has accomplished its original intent. SOX forces Chief Executive Officers and Chief Financial Officers to take responsibility for their actions and be cognizant of internal controls. However, the economy was greatly affected by the frauds and the implementation of SOX, and has not really recovered. Overall, SOX has done little to increase investor confidence. Also, I am not sure how much of SOX is actually being enforced. The text ends with the publication of SOX and does not provide any additional information on the post-SOX era, which includes a 14-year span of time.
Since the biggest criticism of the Sarbanes-Oxley Act of 2002 (SOX) appears to be its costs, perhaps a provision should be added that addresses the costs to smaller public companies. As stated in question 12-4, it is difficult to determine the effect of SOX with no analysis of the last 14 years of implementation. A study should be conducted on the effects of SOX to determine if any of the existing sections should be