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Sarbanes-Oxley Act Research Paper Abstract In this research paper I will investigate in the issues related to the Sarbanes-Oxley Act, its overview, contents, historical prerequisites, as well as present research materials regarding the factual benefits of its implementation on practice.
I will also attempt critically evaluate Sarbanes-Oxley Act and present its advantages and disadvantages from the standpoint of current economic situation.
Introduction Sarbanes-Oxley Act, which is frequently referred to as SOX or Sarbox, was introduced 6 years ago inor to be more specific, was enacted on July, 30 This act appeared not at once without any reasons, there were serious prerequisites for its development and enactment.
During scandals with mentioned companied involved, investors lost billions of dollars and there was no legal act to protect their investments in any way. These scandals not just caused enormous money loss, but also severely decreased public confidence in the securities market of the USA. This act is often considered one of the most outstanding proactive reforms during last several decades.
Sarbanes-Oxley Act contains 11 titles, which provide the description of specific requirements and mandates for financial reporting. There are several sections in each title.
Circumstances that Led to the Sarbanes-Oxley Act A series of complicated factors formed the conditions and culture in which many significant corporate frauds took place between years and The dramatic frauds at Enron, WorldCom, and Tyco, which received wide publicity, exposed important problems with conflicts of interest and practices of incentive compensation.
The analysis of their complicated and controversial roots causes made contribution to the passage of Sarbox in Before the adoption of this act, there were numerous cases of auditor conflicts of interest.
They also performed essential consultancy or not related to audit work for the companies they performed audit for. All consulting services were based on agreements many of which were far more profitable for auditors than that of the auditing services provided.
This is factual representation of the conflict of interest. Boardroom failures were also a real problem. Scandals that took place revealed that Board members either did not perform their direct duties and exercise their responsibilities or did not possess enough expertise to understand the businesses complexities.
In many cases, Audit Committee members were very much dependant on management and were not able to make independent decisions.
Conflicts of interest of stock market analysts also took place. Roles of stock market analysts, who make recommendations regarding buying and selling on company bonds and stock, and of investment bankers, that assist companies in provision of loans or handle mergers and acquisitions, are said to be another source for conflicts.
This type of conflict is somehow similar to the auditor conflict, as when analysts make buy or sell recommendations regarding stock when they additionally provide profitable investment banking services, there is the presence of conflict of interest.
There are some cases when excessive funding is not better then insufficient funding. Sarbanes in the interview to the Journal of Leadership and Organizational Studies in summer, indicated that rule-making and enforcement are more effective post-Sarbox.
Banking practices were also experiencing conflict during the period from to When the bank lends money to the company it is the particular signal to investor about the possible risk the company might have.
Referring to the Enron case, several main banks accommodated with the large loans this company without any understanding, or probably ignoring, company possible risks. Such people experienced significant losses as well, of course depending on how much had they invested.
It was obviously not an easy and the fruitful period for investors. In stock market also experienced the drastic decline in technology stocks and also the whole market in the stage of decline.
Particular managers of mutual funds were claimed to have advocated the certain technology stocks purchases, when in reality they were trying to sell them.
Executive compensation is the final issue that led to the adoption of Sarbox. And consequently with a significant stock-based bonus at risk, managers had to meet their goals. The act was passed by Congress of the USA for protection of the investors from the occurrences of fabricated financial activities by corporations.
Several committees were trying to do something and even series of bills was introduced to address corporate misbehavior.Mar 11, · Sarbanes-Oxley Act Research Paper Abstract In this research paper I will investigate in the issues related to the Sarbanes-Oxley Act, its overview, contents, historical prerequisites, as well as present research materials regarding the factual benefits of its implementation on practice.
Sarbanes-Oxley Research Paper Essay Imagine over $60 billion of shareholder value, almost $2. 1 billion in pension plans, and initially 5, jobs – disappeared (Associated Press, ).
One would have to wonder how that is possible. Sarbanes-Oxley Act of Sabah Saiyed ACC/ May 21, Susan Hurley Sarbanes-Oxley Act of “The paper describes the main aspects of the regulatory environment which will protect the public from fraud within corporations.
Essay on Sarbanes Oxley Act Of sign in to law the Sarbanes-Oxley Act of This paper will attempt to describe the regulatory aspects of the SOX Act and how is supposed to protect the public from fraud within corporations.
Sarbanes-Oxley Act. In the aftermath of the post-boom financial scandals in the U.S., Congress revised significantly federal securities laws and . Aug 09, · Words: Length: 3 Pages Document Type: Essay Paper #: Sarbanes-Oxley Act of is will probably be known as one of the most significant change to federal securities laws in the United States since the New Deal.