Sarbanes Oxley Public Policy

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Sarbanes- Oxley Act of 2002: A Comprehensive Review
By Hennessey T. Harrington For Business 102 Ethics & Public Policy Dr. Jasso TA Josh December 7, 2010

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TABLE OF CONTENTS 1.0 Sarbanes- Oxley Act of 2002: Spectrum of Objectives 1.1 On History 1.2 On Accountability 1.3 On Corporate Social Responsibility 2.0 Sarbanes- Oxley Act of 2002: A Historical Account 2.1 On Necessity 2.2 On Defective Oversight 2.3 On Corruption 2.4 On Conflict of Interest 2.5 On Imperfect Disclosure 3.0 Sarbanes- Oxley Act of 2002: Implementation & Context 4.0 Sarbanes- Oxley Act of 2002: Significance With Respect to Business & Society 4.1 On Business 4.2 On Society 5.0 Sarbanes- Oxley Act of 2002: A Political Analysis of Strengths & Weaknesses 5.1 On Weakness: Cost of Compliance 5.2 On Strengths: Moving Forth 5.3 Recommendation for Policy Makers 6.0 Conclusion 7.0 Appendix

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Abstract [Although critics claim that the Sarbanes- Oxley Act of 2002 has been costly to the private sector and contributed to national deficit; SOX has however, drastically improved corporate transparency, restored investor confidence and proven impactful with regards to the Social Responsibility Movement. This comprehensive analysis will validate the imperative ethical purpose of SOX, while also demonstrating its positive impact on national business markets.] Hennessey T. Harrington

1.0 Sarbanes-Oxley Act of 2002: Spectrum of Objectives
“To protect investors by improving the accuracy and reliability of cooperate disclosures made pursuant to the securities laws, and for other purposes” (Sarbanes-Oxley Act of 2002)

The Sarbanes- Oxley Act of 2002 set out (1) to ensure corporate honesty with respect to finance, (2) to enhance accountability among corporate decisions makers, and (3) make an impactful and legal stride towards national Corporate Social Responsibility. Overall the SOX Act implements governance measures that legally ensure the transparency and authenticity of corporate financial reports and procedures. Written with a motif of quality assurance, the SOX act aims to rebuild investor confidence that has been eroded by major scandals such as the Enron and WorldCom cases. Sarbanes- Oxley implements specific procedures that are backed by specific government punishments, meanwhile introducing private oversight for accounting services. The SOX act is a significant step towards U.S. government assurance of Corporate Responsibility. 1.1 On Honesty Sarbanes- Oxley act of 2002 begins with the establishment of the Public Company

Harrington 4 Accounting Oversight Board or PCAOB. Found in Title I, the PCAOB was formed to, “oversee the audit of public companies that are subject to securities laws… to protect the interests of investors and further the public interest of investors” (SOX SEC.101.A). This is a board independent of the United States government that will register public accounting firms, provide quality control, conduct inspections, hold investigations, provide operations standards and manage major accounting practices. It consists of 5 members that are replaced every 5 years and are required to remain independent from any accounting firm. The PCAOB provides a governing body that has discretion towards national standards and regulates practice; both vestiges that have never been implemented in corporate accounting. By utilizing a board of members, investors now have a tangible source to contact for discrepancies and unsure safety from fraudulent firms. SOX also strives to reinforce financial honesty with Title IV “Enhanced Financial Disclosure” (SOX SEC.401-409). This clause addresses financial honesty by making the financial ongoing of a corporation more transparent to its investors. Ideally, firms will no longer be able to hide their numbers from investors, as seen with Enron and so forth. Most importantly from this clause is the call for “ Off Balance Sheet Transactions” (SOX SEC.401.J)....
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