Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 was signed into legislation to decrease fraudulent financial acts and increase corporate CEO, CFO, and shareholder responsibility. It was considered as being the most far-reaching legislation since the 1930s to affect independent auditors of public corporations as well as the public corporations themselves. After twelve years of being incorporated, SOX proves to hold both supporters and opponents. In this paper, I will discuss three views supporting the effectiveness of SOX, three views supporting the ineffectiveness of SOX, and my opinion based on these six views.
Effective SOX Views
Steven Harris, a Public Company Accounting Oversight Board member and original participant in crafting the Sarbanes-Oxley Act, provides ten reasons supporting his view on the adequate effectiveness of SOX. First and foremost, investor confidence has been restored. It helped to establish the Public Company Accounting Oversight Board, which jump-started the establishment of auditors’ independent regulatory regimes to be used within and outside the United States. Conflicts of interest have dwindled, as companies are now prohibited from auditing their own financial asset valuation system. An independent audit committee must be reported to by audit firms. Corporate accountability has increased, ensuring that CFOs and CEOs are personally certifying the financial statements of their companies. Provisions require that the bonuses or financial incentives of CEOs and CFOs be forfeited if financial results have to be restated. Stock options backdating ended. Whistleblower protected was established to ensure that public company employees are not retaliated against if they report issues or discrepancies. Public companies must disclose quarterly and annual financial reports regarding off-balance sheet arrangements to investors and the SEC. Providing loans to directors and officers by public companies is now restricted...