Sarbanes Oxley
Financial scandals have impacted many individuals such as public companies and accounting firms. Sarbanes Oxley has made many changes to many companies. The major financial scandals have impacted many investors and required more regulations to avert this problems. Sarbanes Oxley has tried to increase ethics in the upper management in many public companies. The upper management has tried to improve on social responsibility and increase the public view. There are many critics to Sarbanes Oxley and many different suggestions on improvements.
History of Sarbanes-Oxley Act
Scandals of many forms shape regulations in many aspects. The Sarbanes Oxley Act was a new regulation that was initiated because of financial scandals. Tyco, WorldCom and Enron were companies that violated the trust of the shareholders and consumers worldwide. Accounting firms also were responsible for these financial scandals because the firms did not have honesty and integrity during the audit process. The regulations were enacted in order to assist in having accountability within the public companies and also the accounting firms.
These companies were a result of conflicts of interest and compensation with incentives which drove the dishonest and unethical behaviors. Before the Sarbanes Oxley Act, there were many failures and conflicts of interest. For example, board of directors that were in the audit committee did not exercise any responsibilities or any knowledge to understand the complexities of the business the board of directors were assigned to overview. Therefore, there was no independence from management. Auditors also had lack of responsibility and due diligence because of the conflict of interest. The auditing firm normally had consulting work and auditing services provided to the company and caused a large conflict of interest.
United States senators, Paul Sarbanes and Michael Oxley were the individuals that sponsored the bill to enact these standards for public
History of Sarbanes-Oxley Act
Scandals of many forms shape regulations in many aspects. The Sarbanes Oxley Act was a new regulation that was initiated because of financial scandals. Tyco, WorldCom and Enron were companies that violated the trust of the shareholders and consumers worldwide. Accounting firms also were responsible for these financial scandals because the firms did not have honesty and integrity during the audit process. The regulations were enacted in order to assist in having accountability within the public companies and also the accounting firms.
These companies were a result of conflicts of interest and compensation with incentives which drove the dishonest and unethical behaviors. Before the Sarbanes Oxley Act, there were many failures and conflicts of interest. For example, board of directors that were in the audit committee did not exercise any responsibilities or any knowledge to understand the complexities of the business the board of directors were assigned to overview. Therefore, there was no independence from management. Auditors also had lack of responsibility and due diligence because of the conflict of interest. The auditing firm normally had consulting work and auditing services provided to the company and caused a large conflict of interest.
United States senators, Paul Sarbanes and Michael Oxley were the individuals that sponsored the bill to enact these standards for public
References: Hess, D. (2007). A business ethics perspective on Sarbanes-Oxley and the organizational sentencing guidelines. Michigan Law Review, 1051781. Kaserer, C., Mettler, A., & Obernberger, S. (2011). The Impact of the Sarbanes-Oxley Act on the Cost of Going Public. Business Research, 4(2), 125-147. Kessel, M. (2011). Sarbanes-Oxley overburdens biotech companies. Nature Biotechnology 29 (12), 1081-1082 http://proxy1.ncu.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=ofs&AN=67759374&site=ehost-live Mitra, S., Jaggi, B., & Hossain, M. (2013). Internal Control Weaknesses and Accounting Conservatism: Evidence From the Post–Sarbanes–Oxley Period. Journal Of Accounting, Auditing & Finance, 28(2), 152-191. doi:10.1177/0148558X13479057 Orin, R. M. (2008). Ethical guidance and constraint under the Sarbanes-Oxley Act of 2002. Journal of Accounting, Auditing & Finance 23 (1), 141-171 http://proxy1.ncu.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=28106551&site=ehost-live