Article Review - The Sarbanes-Oxley Act of 2002

Topics: Corporate governance, Enron, Sarbanes–Oxley Act Pages: 2 (405 words) Published: October 12, 2014
Article Review
The Sarbanes-Oxley Act of 2002


In response to the Enron and WorldCom scandals, the Sarbanes-Oxley Act was enacted in July 30, 2002. This provides a comprehensive power that modifies the compliance of how companies would need to report their financials to the Securities and Exchange Commission (SEC). The law’s purpose is to solve precise mechanism failures in accounting approaches and requires greater levels of fiduciary responsibilities especially for those companies that are involved in corporate governance. The Act also created the board named Public Company Accounting Oversight Board (PCAOB) to help create principles criteria and regulations for all SEC registrants. This legislation will not only affect the financial area of corporations, but will also affect the IT departments due part of their job it’s to store corporate electronic records. According to the Sarbanes Oxley Act states all business records, including the electronic documents, must be kept for at least five years. Some of the consequences for non-compliance are large fines, imprisonment, or could be both.

Companies like Enron, WorldCom misrepresented a series of questionable transactions that resulted in great losses to company’s stakeholders. Act will improve accountability by strengthening the internal checks and balances within corporations.


The Sarbanes Oxley Act article brings many business issues that can incur when dealing with US market and how corporations publish their financials. Disguising certain financial information could lead to business malpractices. Some of the legal issues could be bankruptcy, fraud (i.e. securities and accounting), lawsuits and ethical issues.


The effects of these legal issues are that could compromise and harm tremendously the consumer, shareholders, and employees relationships with the company in question. Companies have to make sure their records are in...
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