Dodd-Frank And Sarbanes-Oxley Act Analysis

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Dodd-Frank and Sarbanes-Oxley Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into federal law by President Barack Obama on July 21st 2010. This was passed as a response to the recession in 2008. It brought the most significant changes to financial regulation in the United States since the regulatory reform that followed the Great Depression. The Dodd-Frank Act affected all financial regulatory agencies in almost every part of the nation’s financial services industry. The Act is intended to create organizations to fill regulatory gaps that contributed to the financial crisis in 2008 and streamline and increase oversight of specific institutions protecting the economy and American consumers (Twight 2015).
According …show more content…
One in particular had a national reputation for having consistent performance in regardless of how the market was performing. That company was Enron. Within weeks Enron’s stock went from $90 as share to be almost worthless. This occurred because the management team tried to cover up losses from previous years by altering the financial statements. This deception gave investors a reality check and as an effect, all investors started looking into financial statements of other corporations and other reputable companies also were conducting unethical practices. This discovery created a need to enact a change, which happened on 30 July 2002 called the Sarbanes-Oxley …show more content…
This would hold them personally accountable for any misrepresented data. Second, the SOX increased fines and prison sentences for individuals who attempted to defraud investors or misrepresent actual figures. Third, the company must provide a description of its internal controls in an attempt to increase investor and public confidence. This also built the confidence of the employees and allows them to gain insight in to the company’s procedures. In addition it highlighted executive compensation plans (Brigham et al 2014). Forth, the company is responsible for hiring an outside accountant to audit and check the accuracy of their financial reports and a section of the financial reports include the auditor’s opinion of the financial status of the company. Fifth, all off balance sheets transactions must be reported. Finally the Security and Exchange Commission (SEC) has the authority to investigate those companies expected of wrongdoing and do random screening to ensure companies are abiding by the
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