1. What are the primary goals and tenets of SOX with respect to fraud?
The goals of the Sarbanes-Oxley Act are expansive, including the improvement of the quality of audits in an attempt to eliminate fraud in order to protect the public’s interest, as well as for the protection of the investors (Donaldson, 2003). Prior to the implementation of SOX auditors were self-regulated with consumers reliant on their honesty and integrity. However, the auditing profession failed at self-regulation, thus necessitating the implementation of a security measure that would protect the investors and the public and restore confidence in the accounting profession. SOX was the response by the federal government, augmenting the role of auditors in enforcing federal securities laws against fraud and theft within public companies. (Coates, 2007) Additionally, SOX emphasizes executive responsibility and the improvement of disclosures and financial reporting (Donaldson, 2003).
2. How is SOX enforced?
The Sarbanes-Oxley Act is enforced by the Securities and Exchange Commission (SEC); SOX relies on the SEC to implement rulings in accordance with the law. Penalties can range from simple slap on the wrist that requires the wrongdoer to attend specified classes to much more severe sanctions including jail time and/or large fines. (Coates, 2007) The Sarbanes-Oxley Act aided in the restoration of investor confidence by strengthening enforcement of the federal securities laws. SOX broadened the Security Exchange Commission’s ability to enforce and penalize, acting as a deterrent for potential fraudsters and permitting restitution to those who have been injured. (Donaldson, 2003) Additionally, SOX created the Public Accounting Oversight Board (PCAOB) to aid in the enforcement of their mandates (Coates, 2007).
3. What is PCAOB,