The Sarbanes-Oxley Act (SOX)

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Sarbanes-Oxley Act Peggy Baker Liberty University May 1, 2011 Abstract Financial statements are a means of communication between companies and investors. The information provided in financial statements has not always been true. The collapse of companies such as Enron, the scandals that followed, and the distrust from the public caused lawmakers to create the Public Company Accounting Reform and Investor Protection Act of 2002. This act is now known as the Sarbanes-Oxley Act. The Sarbanes-Oxley Act’s (SOX) main provisions include: (1) oversight board, (2) corporate executive accountability, nonaudit services, retention of work papers, auditor rotation, conflicts of interest, hiring of auditors, and internal controls. SOX has…show more content…
The Supreme Court ruled that it was unconstitutional because it did not give the presidential administrations the power to remove board members (Younglai et al., 2010). Another major con of SOX is the cost to comply with the audit requirement. Many lawmakers fear that these costs are pushing firms to move their operation oversees (Sarbanes-Oxley Act. (n.d.). Overall, SOX has caused companies to be more forthcoming with their financial data at the same time instilling more confidence from the public. Therefore, the cost of companies continuing to commit fraud outweighs the cost of companies having to perform…show more content…
Sox created standards for corporate accountability. Failure for companies to abide by the provisions of the law include prison terms and hefty fines. The penalties depend on which section of the act a company is not in compliance with. SOX has made it possible for criminal penalties to be increased in the case of “white collar” crimes. In the tampering of an investigation of bankruptcy or fraud, an individual can be sent to prison for up to 20 years. Failure to comply with the SEC’s rules on record keeping could carry a sentence of 10 years (Carmichael et al., 2007, p.19). With the enactment of the Sarbanes-Oxley Act, overall, investor confidence with auditors in the U.S. has been

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