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The law standardized internal control and auditing procedures. It mandated auditing committees use stricter standards when vetting accounting firms and raised standards for corporate responsibility for fraudulent accounting. It provided more stringent conflict-of-interest guidelines for accounting firms. It was passed by the U.S. Congress to protect ordinary investors from losing their money due to fraudulent accounting practices which ordinary investors could not monitor, through public documents. It also established an oversight board for public companies and mandated "stricter disclosure within company financial statements and ethical guidelines to which senior financial officers must adhere" (Sarbanes-Oxley Act of 2002 -- SOX, 2009, Investopedia). It created "authorities available to the Commission and the Federal Court, as well as required broker and dealer qualifications enforcement methods available for punishment of activities deemed criminal by the Act" (Sarbanes-Oxley Act of 2002 -- SOX, 2009, Investopedia).
Within the act,...
Companies must devote more resources adhering to Sarbanes-Oxley accounting standards. Some companies have expressed anger at the fact that they cannot use these costs to invest in other areas, and instead must divert funds to demonstrating bureaucratic compliance (Stephens & Schwartz 2006). But given the fallout from the Enron and other scandals of large firms, there is little public groundswell to limit the scope of Sarbanes-Oxley.
Works Cited
Sarbanes-Oxley Act of 2002 -- SOX. (2009). Investopedia. Retrieved February 9, 2009 at http://www.investopedia.com/terms/s/sarbanesoxleyact.asp
Stephens, Lynn & Robert G. Schwartz. (2006, June). The chilling effect of Sarbanes-Oxley
Myth or reality? The CPA Journal.
New York State Society of CPAs. Retrieved February 9, 2009 at http://www.nysscpa.org/cpajournal/2006/606/infocus/p14.htm
Works Cited
Sarbanes-Oxley Act of 2002 -- SOX. (2009). Investopedia. Retrieved February 9, 2009 at http://www.investopedia.com/terms/s/sarbanesoxleyact.asp
Stephens, Lynn & Robert G. Schwartz. (2006, June). The chilling effect of Sarbanes-Oxley
Myth or reality? The CPA Journal.
New York State Society of CPAs. Retrieved February 9, 2009 at http://www.nysscpa.org/cpajournal/2006/606/infocus/p14.htm
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