The Sarbanes-Oxley Act (SOX) of 2002 was put in place after several failures entailing functions meant to safeguard the interests of the investors (Dowd, 2016). With numerous highly controversial requirements, SOX developed a modified regulatory outline for the public accounting and auditing career and offered guidance for a reinforced corporate administration. It was the most far-reaching regulation influencing public companies and their independent examiners since the 1930s (Dowd, 2016). It is commonly attributed to the consolidation of CEO and CFO obligation for all financial disclosures and linked controls and advanced competence and engagement on financial audit teams.
When examining the general efficiency of SOX, an essential contemplation to make is whether the performance of independent accountants has enhanced in the last one decade. The significance of auditor performance is viewed in the fact point that the first subchapter of the act empowers the body “to supervise the review of firms that are governed by security laws, and associated matters, guarding the welfare of stakeholders and improving the public interest in the provision of educational, precise, and sovereign audit reports” (Madison, Cohen, & Shirley, 2015). When SOX was implemented, the exercise of public auditing was classified into assessments of publicly held companies and the private sector. SOX created the Public Company Accounting Oversight Board (PCAOB), a sovereign entity controlled by the US Securities and Exchange Commission (SEC). The PBAOB was empowered to generate and administer practice values to all publicly held businesses.
The efficiency of SOX relies on the robustness to which it is implemented. Worries remain as to whether the SEC’s and Department of Justice’s execution of SOX has been adequate. An article published in the Wall Street Journal points out that SOX’s lethal power- the penalty of jail time for corporate managers who perceptively confirm erroneous financial reports- is being underutilized (Dowd, 2016). Though SOX has achieved a lot in advancing corporate emphasis on a solid moral culture in public companies, there is a need for empowerment of audit company performance.
- Dowd, K. (2016). A Comparison of Accounting Fraud Before and After Sarbanes-Oxley.
- Madison, G. W., Cohen, G. J., & Shirley, W. A. (2015). Financial Regulatory Reform: Key Changes That Reduced Systemic Risk. Banking and Financial Services.