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Principles or guidelines enforced on companies for drafting their finance statements, so as to provide investors with least possible level of reliability in the financial statements used while analyzing companies for investment purposes. refers to a widely accepted set of rules, standards,
conventions, and procedures for reporting financial info
Accounting Profit
A company's total earnings, calculated according to Generally Accepted Accounting Principles (GAAP), and includes the explicit costs of doing business, such as depreciation, interest and taxes.
Economic Profit
The difference between the revenue received from the sale of an output and the opportunity cost of the inputs used. This can be used as another name for "economic value added" (EVA).
In response to numerous corporate failures in the private sector and a loss of confidence in accountability, Sarbanes-Oxley Act was enacted in 2002 by U.S Congress. to protect investors from the possibility of fraudulent accounting activities by corporations. Scandals such as Enron, Tyco, and WorldCom shook investor confidence in financial statements and required an overhaul of regulatory standards leads to formation of SOX Act.
The rules and enforcement policies outlined by the SOX Act amend or supplement existing legislation dealing with security regulations. The act includes significant reforms intended to strengthen auditor independence and to improve audit quality. Government auditors and financial professional must get the message from the SOX act reforms and seize upon the opportunity to modernize our profession for future.
Conclusion
We can say that indeed SOX reduces the cases of malfeasance and manipulation of financial statement by various implications and changes in auditing but it doesnt deal with the root cause for accounting scandals which resulted from the difference between the Accounting profit and economic profit due to GAAP. Indeed the resulted scams effect the firm itself but it has even more of an adverse effect on a nation since many foreign investors see investment more risky lead to sometimes economic crisis.
References
www.google.com and wherever it takes after I searched any term or situation.