Aisha Hudson MGT 261- Accounting Fabian K.

Nabangi Sarbanes-Oxley Act Put into law in 2002, the Sarbanes-Oxley Act is also known as the Public Company Accounting Reform and Investor Protection. It was implemented by President George W. Bush in response to the corporate scandals ensuing in the business arena, one of the most notorious being that involving the Enron Corporation. As a result if the illegal actions and negative media attention, investors in the companies involved were losing billions of dollars while similarly causing a loss of public trust in the corporate world and its practices. Named after its architects, Sen. Paul Sarbanes and Rep. Michael G. Oxley, this law, termed Sox or Sarbox, was the administrations plan to reform and improve the business practices of U.S. public companies but not those companies that are privately held. Initially, this reformation law was divided into two separate bills put before the House and the Senate by the two politicians for whom it is named. A Conference Committee was formed after both bills passed one body of legislation separately, and it the Sarbanes half that was relied upon heavily as the frame, supporting all of the additions and revisions. Supporters of the Sarbox law state that it is a necessary measure to be enacted, in addition to bolstering public trust in the corporate realm and reinforcing accounting controls. However, opposition to the bill say, that the Sarbanes-Oxley Act has reduced the nations competitive advantage abroad and is far too convoluted and too restrictive on the financial environment in the U.S. market. With 11 sections, the Sarbox act covers areas such as corporate board responsibilities to the criminal penalties for illegal action within the companies. One of the

more important aspects of this law is that the Securities and Exchange Commission (SEC) is required to execute ruling to force compliance with the Acts dictates. In the first section of the Act, the Public Company Accounting Oversight Board (PCAOB) is established. It is the duty of this Board to regulate, oversee, inspect and discipline the accounting firms that are responsible for auditing public companies. In the subsequent section, or title, of the Sarbox law, regulations are implemented to offset and avoid conflict of interest involving auditing firms, to dictate auditor reporting, and to define auditor partner rotation. Also, the following sections also cover and concern corporate responsibility, improved financial disclosures, conflict of interest among analysts, and commission resources an authority. Each section has sub-sections that detail and describe the regulations and improvement being implemented under each heading. Further sections besides those previously mentioned are those that concern studies and reports, corporate and criminal fraud accountability, white collar crime penalty enhancement, corporate tax returns, and corporate fraud accountability. The proposed benefits of Sarbanes-Oxley as well as the drawbacks have been hard for financial organizations and analysts to conclude upon because they cannot separate its effects from other influences such as that of the stock market. There has been much disagreement and contention on both sides that the Act has been both an improvement and a hindrance on U.S. companies. There have been surveys and research papers and conferences but none have seriously cemented that the Act is good o bad overall, thus it remains to be determined in the future if the impact of the bill has been negative or positive.