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The implementation of the Sarbanes-Oxley Act section 404 as federal law was a necessary step in order to regain public trust in the financial controls and reporting of companies. Huge corporate scandals, such as the ones affecting Enron, and WorldCom, shook the public to their core, and resulted in the demand for consistent measures that would make companies accountable for all financial operations. This legislation was necessary and useful, but the focus of the law may be off the mark.
Accounting practices may have unfairly received the blame for corporate scandals in recent years. As outlined by Lin and Wu (2006), the aim of the Sarbanes-Oxley Act section 404 is somewhat misguided, and is placing undue attention on accounting as the culprit in the case of these crimes. Instead, the focus of measures to improve accuracy and reliability of financial controls and reporting should be directed at management practices. The future success of legislation...
No matter how effective internal controls are assessed by auditors to be, it is the decision of management as to whether they want to manipulate business processes to achieve certain financial objectives, and moreover abuse accounting systems in the process (Lin and Wu, 2006).
References
Lin, H.H. & Wu, F.H. (2006). Limitations of section 404 of the Sarbanes-Oxley Act. The CPA Journal, retrieved at http://www.nysscpa.org/cpajournal/2006/306/essentials/p48.htm.
Weirich, T.R. (2006). Sarbanes-Oxley Act and section 404: basics on internal control reports. The RMA Journal, 88(1), 28-34.
The investors got intoxicated by fraud happened to them because of greedy people. Thousands of employees left as the stock market went to the peak but most of them left their jobs due to low pay as well. (Kerry Hannon, July 6, 2005) bill was passed by the President Bush after the corporate fraud nearly just after three weeks on April 25, 2002. It referred to the Senate Banking
The integrity of the financial sector of these organizations controlled by state agencies and related services, would improve. The provisions offered by the act would serve as models based on which standards for other non-profit organizations can be developed in the future. It will create a better understanding of the limitations placed on auditors and a deeper scrutiny of the financial and transaction statements presented by the auditors. While
However, because of the costliness of this requirement, many believe it is especially unfair to small businesses who are already struggling to be competitive in an increasingly hypercompetitive, globalized economy. As such, small, public companies have been given a temporary reprieve from some of Section 404's strict and costly requirements. In addition, there have been new guidelines set forth for auditors, with a hopes of reducing the cost of compliance of
In the company it has ushered in a better accounting and the management with upgrades in technology and competence, there will be a requirement for training and upgrading managers and staff to meet the contingencies of the proposed systems and controls. The Sarbanes-Oxley section will help the companies on the other hand gain a lot of investment and support from the investors by providing a quality and timely information,
Sarbanes-Oxley Act of 2002 administration as also a majority of other western administration witnessed the collapse of corporate giants like Enron & Worldcom in the aftermath of noticeably fraudulent executive actions of these companies. This led to shareholders losing confidence and stringent laws was felt necessary in the form of new legislation to avoid repetition of Enron and Worldcom like incidents. The then President George W. Bush entrusted Senator Paul
SOX The Sarbanes-Oxley Act (SOX) was passed in 2002 as a response to a wave of corporate accounting scandals. To measure the effectiveness of SOX over the past ten years, the objectives of the Act must be understood. The text of the Act states that its purpose is "to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes." The