Enron, WorldCom, and the Sarbanes-Oxley Act's regulatory response

Accounting Scandals: With the accounting scandals in 2002 and 2003, many have called for increased government regulations. Will increased regulations help to reduce the kinds of scandals seen in recent years? Why or why not?

The accounting scandals at Enron and WorldCom that implicated such trusted accounting firms as Arthur Anderson did result in more stringent government regulation of the accounting process. Google the phrase 'accounting scandals of 2002' and in virtually every web search engine one types this phrase, the words 'Sarbanes-Oxley Act' appears, including software is designed to comply with the accounting procedures required by this recent, landmark act. But what does the Sarbanes-Oxley Act mean, a sixty-six page act designed, according to the stated purpose of the law, to ensure full and fair disclosure of corporate financial records, with the aim of protecting investors?

The act is considered the single most important piece of legislation affecting corporate governance, financial disclosure and the practice of public accounting since the U.S. securities laws of the early 1930s, after the Great Crash. Sarbanes-Oxley stipulates criminal and civil penalties for securities violations. Also, it mandates auditor independence from the interests of the firm, meaning that accountants cannot have a financial interest in the success or failure of the firm.