Analysis of the Sarbanes-Oxley Act
Analysis of the Sarbanes-Oxley Act
Abstract
The Sarbanes-Oxley Act (SOX) was enacted in July 30, 2002, by Congress to protect shareholders and the general public from fraudulent corporate practices and accounting errors and to maintain auditor independence. In protecting the shareholders and the general public the SOX Act is intended to improve the transparency of the financial reporting. Financial reports are to be certified by the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) creating increased responsibility and independence with auditing by independent audit firms. In discussing the SOX Act, we will focus on how this act affects the CEOs; CFOs; outside independent audit firms; the advantages and a disadvantage of this act; and changes that still need to be incorporated.
The CEO’s and CFO’s of public companies
The Chief Executive Officer (CEO) of a public company is the executive with the chief decision-making authority in an organization or business. The Chief Financial Officer (CFO) of a public company is responsible for directing and coordinating the financial activities of the firm. CEOs and CFOs have a fiduciary duty to the owners and to the stakeholders in the public companies. The Sarbanes-Oxley Act (SOX) of 2002 was created to strengthen corporate governance, leading to more credible oversight both externally and internally (Rehbein, 2010). According to Richard Orin, the act constituted a daring effort to legislate morality, with the goal of restoring integrity to and public confidence in the financial markets (2008). There is evidence that the SOX regulations have led to more disclosure and information, benefiting market participants, lowering the cost of capital, and providing more accurate information about the performance of executives such as the chief executive officer and chief financial officer (Rehbein, 2010).
The implementation of effective business ethics became essential and the new
Abstract
The Sarbanes-Oxley Act (SOX) was enacted in July 30, 2002, by Congress to protect shareholders and the general public from fraudulent corporate practices and accounting errors and to maintain auditor independence. In protecting the shareholders and the general public the SOX Act is intended to improve the transparency of the financial reporting. Financial reports are to be certified by the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) creating increased responsibility and independence with auditing by independent audit firms. In discussing the SOX Act, we will focus on how this act affects the CEOs; CFOs; outside independent audit firms; the advantages and a disadvantage of this act; and changes that still need to be incorporated.
The CEO’s and CFO’s of public companies
The Chief Executive Officer (CEO) of a public company is the executive with the chief decision-making authority in an organization or business. The Chief Financial Officer (CFO) of a public company is responsible for directing and coordinating the financial activities of the firm. CEOs and CFOs have a fiduciary duty to the owners and to the stakeholders in the public companies. The Sarbanes-Oxley Act (SOX) of 2002 was created to strengthen corporate governance, leading to more credible oversight both externally and internally (Rehbein, 2010). According to Richard Orin, the act constituted a daring effort to legislate morality, with the goal of restoring integrity to and public confidence in the financial markets (2008). There is evidence that the SOX regulations have led to more disclosure and information, benefiting market participants, lowering the cost of capital, and providing more accurate information about the performance of executives such as the chief executive officer and chief financial officer (Rehbein, 2010).
The implementation of effective business ethics became essential and the new
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