Unit 1 Assignment Essay

1096 WordsApr 12, 20145 Pages
Impact of the Sarbanes-Oxley Act on U.S. corporate governance Sarbanes-Oxley Act was designed to protect shareholders from the excesses and failed oversight that characterized failures at Enron, Tyco, WorldCom, Adelphia Communications, Qwest, and Global Crossing, among other prominent firms. Several key elements of Sarbanes-Oxley were designed to formalize greater board independence and oversight. For example, the act requires that all directors serving on the audit committee be independent of the firm and receive no fees other than for services of the director. In addition, boards may no longer grant loans to corporate officers. The act has also established formal procedures for individuals (known as “whistleblowers”) to report incidents of questionable accounting or auditing. Firms are prohibited from retaliating against anyone reporting wrongdoing. Both the CEO and CFO must certify the corporation’s financial information. The act bans auditors from providing both external and internal audit services to the same company. It also requires that a firm identify whether it has a “financial expert” serving on the audit committee who is independent from management. Although the cost to a large corporation of implementing the provisions of the law was $8.5 million in 2004, the first year of compliance, the costs to a large firm fell to $1–$5 million annually during the following years as accounting and information processes were refined and made more efficient. Pitney Bowes, for example, saved more than $500,000 in 2005 simply by consolidating four accounts receivable offices into one. Similar savings were realized at Cisco and Genentech. An additional benefit of the increased disclosure requirements is more reliable corporate financial statements. Companies are now reporting numbers with fewer adjustments for unusual charges and write-offs, which in the past have been

More about Unit 1 Assignment Essay

Open Document