SARBANES OXLEY ACT 2002

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Sarbanes-Oxley Act of 2002
Mariea Pack-Elder,
ACC 561
November 24, 2014
George Bray

Avoiding Future Frauds with the Sarbanes-Oxley Act It is clear that the establishment of the Sarbanes-Oxley (SOX) act in 2002 was specific to reducing future financial fraud and imposing criminal penalties for publicly traded companies. What is not clear is whether or not the act has proved to be successful in its implementation and governance. The establishment of the act and subsequent amendments are intended to protect the public from fraud in the financial accounting of publicly traded corporations. In 2002, there were opinions both for and against the effectiveness of SOX. More than a decade later, there are still opinions on both sides of the debate.
Criticism of the Sarbanes-Oxley Act
The effectiveness of the Sarbanes-Oxley act has been highly criticized since its inception. One of the major contentions is that the Sarbanes-Oxley act has no provisions to differentiate the requirements for small publicly traded businesses from large conglomerates (that lead and often monopolize the marketplace). Publicly traded companies that are small in size may find the costs of compliance prohibitive to the future of their business (Coustan, 2004). Critics of SOX believe that this unnecessarily reduces the number of players in a competitive marketplace.
The cost of compliance can be excessive for some smaller companies. Auditing expenses cause companies to seek private investment and become privately owned (San Antonio Express-News, 2007). Ten years ago, critics expressed “fears that small, publicly listed companies might not meet internal control reporting requirements without substantial additional expense; some may have to delist because of it. It could mean only larger companies will go public” (Coustan, 2004, p. 1). In recent years, this debate continues. Critics still express concerns “that Sarbanes-Oxley is overreaching and has placed unnecessary restrictions on



References: American Institute of CPAs. (2006 – 2014). Section 404B of Sarbanes-Oxley Act of 2002. Retrieved from AICPA: American Institute of CPAs: http://www.aicpa.org/advocacy/issues/pages/section404bofSOX.aspx Bishop, K Brite, C. (2013, June 30). Is Sarbanes-Oxley a Failing Law? Retrieved from University Of Chicago Undergraduate Law Review: http://uculr.com/articles/2013/6/30/is-sarbanes-oxley-a-failing-law Coustan, H debate.org. (2014). Do you believe the Sarbanes-Oxley Act has failed? Retrieved from debate.org: http://www.debate.org/opinions/do-you-believe-the-sarbanes-oxley-act-has-failed Gillian, K Gilmore, H. (2013, April 24). After 10 Years, Sarbanes-Oxley Might Be Statutory Overkill. BePress: Selected Works. Hanna, J. (2014, March 10). the costs and benefits of Sarbanes-Oxley. Retrieved from Forbes.com: http://www.forbes.com/sites/hbsworkingknowledge/2014/03/10/the-costs-and-benefits-of-sarbanes-oxley/ Moran, P San Antonio Express-News. (2007, February). The good and bad of Sarbanes-Oxley. Retrieved from tmcnet.com: http://callcenterinfo.tmcnet.com/news/2007/02/19/2347101.htm Srinivasan, M

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