Sarbanes Oxley Act Paper

933 Words Dec 18th, 2012 4 Pages

Sarbanes Oxley Act

Introduction Sarbanes Oxley Act is focused towards identifying accounting frauds in different public companies. This paper discusses about various reasons for the introduction of Sarbanes Oxley Act and causes that has been overlooked.
Causes for Sarbanes-Oxley Act Sarbanes Oxley Act is US federal law, which is established in order to set out the some standards for accounting firms, public company boards and management. These standards are established in order to overcome the problem of accounting scandals. Companies such as Enron and WorldCom have created major accounting scandals. Sarbanes-Oxley Act protects the investors from the accounting scandals
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Sarbanes Oxley Act does also not consider polices related to ethics. It requires each and every individual, who is responsible for the fraud which is not enough to overcome the problem. In addition, Sarbanes Oxley Act should consider the ethical principles from the top level of the organization (Holt, 2007). This act does also not include training and learning programs that helps in generating awareness among members regarding ethics. Furthermore, Sarbanes Oxley Act is very much useful in preventing the failures that will happen in future but it does not consider the causes due to which failure occurred. For example Madoff Investment Security has violated the Sarbanes Oxley Act. This act is not able to find out the individual who has made manipulations in financial statement (Fletcher & Plette, 2008).
Ramification of Sarbanes Oxley Act for Short Run Sarbanes Oxley Act has made some ramification in order to change its task and responsibilities. SOX have outsourced its information system activities to other organization. Through this ramification nature of guidelines has not been affected but suppliers need to be changed. Sarbanes Oxley Act does not consider external auditors in order to perform this type of function. Momentum in Sarbanes Oxley Act has established on the basis of Securities and Exchange Commission (SEC) and New York Stock Exchange (NYSE)

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