The United States has several laws that are intended to further fair, balanced, and competitive business practices. These laws are typically effective as control measures to ensure fair business practices are followed. Determining the success or failure of specific legislation or regulations can be relative to what angle you are looking from. This paper will discuss the Sarbanes – Oxley Act of 2002 and how it addresses concerns surrounding fair accounting practices.
Anytime new laws or regulations are introduced there is initial skepticism about their purpose and the impact they will have even when the laws that are enacted that are intended to promote fair and competitive business practices. One example of a regulation that was enacted and was initially criticized is the Sarbanes – Oxley Act of 2002. This act is designed to reform accounting practices among companies as well as establish control methods and tougher penalties for those who are not in compliance with the Act.
The Sarbanes – Oxley Act of 2002, often referred to as SOX, was enacted following the high profile Enron scandal in 2001 and the WorldCom scandal in 2002 and is intended to protect investors from fraudulent accounting practices and restore the public’s faith in the financial market. Another main focus of the Act is to increase transparency and accountability of business practices. It has been said that the Act is the most significant change to laws involving securities since the Securities and Exchange Act of 1934 (Zameeruddin). The Sarbanes – Oxley Act is enforced by the U.S. Securities and Exchange Commission and carries penalties from one to five million dollars and up to twenty years in prison for knowingly alters, destroys, covers up, or falsifies accounting documentation ("Sarbanes – oxley act section,"). One of the provisions of the SOX Act was to establish internal controls as well as a review board to audit these internal controls to ensure that companies are in...
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