Contents
Introduction.......................................................................................2
The Provisions....................................................................................5
The Value in Context ..........................................................................8
Financial Reporting ............................................................................8
Improvement in Corporate Governance Effectiveness ........................8
Financial Statements and Reduction of Fraud .....................................9
A Template for Private and Non-Profit Businesses ..............................9
Improvement in Liquidity ...................................................................9
Perceptions of the Effectiveness .........................................................9
Benefits for Information Technology Companies .............................. 10
Positive Attributes ...........................................................................10
Perceived Limitations .......................................................................10
Costs of Compliance .........................................................................10
Loss of the Global Competitive Edge .................................................11
Other Arguments .............................................................................11
Call for the Repeal............................................................................12
Conclusion .......................................................................................13
Bibliography ....................................................................................14
Appendix A ......................................................................................17
1
Sarbanes-Oxley Act: An Ethical Perspective
Introduction
In the early 2000’s, the lack of corporate financial transparency, moral leadership, and ethical practices by auditors and accounting firms cost many Americans their jobs and many more lost their retirements and life savings. Atrocious accounting scandals caused by deregulation, failed market procedures, lax auditing oversight, and frankly, a lack of ethics, resulted in the systemic financial failure that shook every aspect of the American economic system. A series of complex and contentious cases of fraud, embezzlement, inadequate oversight of accountants, lack of auditor independence, weak corporate governance procedures, stock analysts' conflict of interests, and inadequate disclosure provisions paved the way for new legislation and ultimately contributed to the passage of the Sarbanes-Oxley Act of
2002 (Lucas, 2004).
The Act focuses on holding Accounting Firms, Board of Directors, and Managers of publicly traded companies criminally liable for falsifying financial statements and for not reporting disclosures of subsidiaries. It was stated that the general goal of the Act is to remove self-regulation from the public accounting industry, to impose greater responsibility on senior executives of companies, and to provide a greater responsibility and obligation on corporate audit committees (Elkins, 2014). While the Act has provided some financial transparency, there are pros and cons associated with its implementation.
Many political advocates for the law believe that the Act has restored investors’ confidence in corporate governance and the U.S. market.
Although this regulation focuses on actions committed by corporations in recent years, corporate fraud is not limited to this period of time. During the early 1900’s American corporations saw many whitecollar crimes. The crimes included manipulation of market prices and misconduct based on conflicts of interest. As a result of the crimes that
