The Sarbanes-Oxley Act
The Sarbanes-Oxley Act of 2002(SOX which is also known as the Public Company Accounting Reform and Investor Protection Act was enacted in July, 30, 2002 as a prompt response to the financial crimes scandals (Adelphia, Enron, WorldCom, Peregrime Systems , Arther Anderson and Tyco International). SOX establishes new, stricter standards for all US publicly traded companies. It does not apply to privately companies. The Act is administered by the Securities and Exchange Commission (SEC), which deals with compliance, rules and requirements. The Act also created a new agency, the Public Company Accounting Oversight Board, or PCAOB, which is in charge of overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies. In my opinion, the benefits of the act cant be able to overcome the frustration and the cost of it. The legislation was to redeem the confidence and faith of the public in the capital markets as well as strengthen corporate accounting controls. So far in the political arena, the law has achieved its goals; more people have faith in the stock market (Gilson 5). Nevertheless, in the economic wise, the reports, observation and the trend of life the Act has caused is not pleasing. The Act did create a series of oversight measures as well as increase the sanctions for white collar crimes; frauds and accounting malpractices just to mention a few. This law meant well but economists could not help reflecting on what the implications on the economy that would be as a result of the new law (Gilson 5-6). The Act provides for the establishment of the Public Accounting Oversight Board to supervise the accounting industry to ensure that cases of conflict of interest are not repeated as was in case in the Enron fraud. The Act proscribes auditors from being consultants in the audit works of their clients (Gilson 6). Executives are also not allowed to receive loans from the company they work...
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