Topics: Stock exchange, Internal control, Stock market Pages: 7 (1589 words) Published: April 21, 2014
 Have you ever invested your hard-earned money into the stock market? If so, you know the risks involved when investing money into a publically traded company. For thousands of people whom had money tied up in stocks with companies such as; Enron, WorldCom, and Health South, their investments were doing great for a very long time. But as time went on, the good times quickly ended. It was discovered that over the past several years the accountants and CEOs of these corporate giants were “cooking the books,” the act of fooling the market into believing profits are higher than they actually are. The unlucky individuals who had believed their money was invested in high earning companies were hoodwinked, and their money was lost forever when all three of the companies eventually filed for bankruptcy. Even though the investors had done no wrong, they were forced to forfeit all shares in the company because of a few selfish people. Do you think that something like this should be allowed? I do not, and I hope no one else does. To help prevent events like these from ever happening again the Sarbanes-Oxley Act was passed in 2002 (SOX) (Adelson). The hasty passing of this Act, specifically on the heels of the collapse of Enron has been the topic of many heated debates, but has the Sarbanes-Oxley Act truly done its job? In my opinion, and in the eyes of may experts, Sarbanes-Oxley is failing the American people. Before I continue, a brief summary of the Act is necessary to gain a better understanding of how it works. A well-noted accounting website,, gives a great explanation on a few basic points of the Bill: “The Sarbanes Oxley Act, in summary, requires that corporations maintain much better financial records than were required in the past. It requires companies to actually establish a system of internal controls by which financial reporting takes place. It then requires managers to prepare quarterly statements assessing the strengths and weaknesses of these controls, and furthermore forces an outside accounting agency to do provide an independent assessment of the in-house auditing controls, and to report any flaws which may indicate sloppy—or fraudulent—practices taking place. As a part of financial reporting under SOX, record keeping is a major point of interest. When crafting this piece of legislation, federal lawmakers made sure that corporations would be required to maintain records—both paper and electronic—for a minimum of five years. Another major provision of the SOX Act is the protection of whistle blowers. Before it was enacted in 2002, the law was much less stern in explicitly regulating against the threatening or harassment of individuals who leak information about malfeasance from the inside. Now, there are special penalties for corporate staff who transgress in this area.”

One of the main concerns following the quick implementation of the Sarbanes-Oxley Act was the high cost being put on the companies to comply with the Bill, specifically Section 404. According to, a website devoted strictly to Sarbanes-Oxley, Section 404 of the Act states, “issuers are required to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting.” Section 404 also requires that an external accounting firm be brought in to determine the effectiveness of the report and all internal controls. To not violate any parts of Section 404 companies are spending and astronomical amount of money every period for which reports are submitted. As Amy Feldman stated in her article recapping the effects of the Act, “by spurring companies to clean up their acts—the fact remains that the law has created inequities, especially for small companies.” She continues by adding that the Bill has adversely impacted long prospering corporations like Home Federal Bank, started in 1929. Curt Hage, Chief-Executive...

Cited: Feldman, Amy. "Surviving Sarbanes-Oxley." Inc 27.9 (2005): 132-138. Academic Search Complete. EBSCO. Web. 2 May 2011.
Montaña, John. "The Sarbanes-Oxley Act: Five Years Later." Information Management Journal 41.6 (2007): 48-53. Academic Search Complete. EBSCO. Web. 2 May 2011.
"Sarbanes-Oxley Act." THE BUSINESS FORUM Online. Ed. Thomas Faulhaber. 11 Dec. 2002. Web. 24 Apr. 2011. .
"Sarbanes-Oxley Act of 2002." The Accounting. 2005. Web. 02 May 2011.
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Wong, Amy E. "Sarbanes Oxley Act, SOX Delisting, Sarbanes Oxley Act Compliance, Section 404 Exemption." In-House Attorney Placement, Attorney Resources, General Counsel Jobs, In-House Jobs Search, Attorney Search Placement - General Counsel Consulting. Web. 24 Apr. 2011. .
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