Sarbanes-Oxley Act

Paper Summary:

The Sarbanes-Oxley Act was signed into law on July 29, 2002. It was the U.S. government's response to the questionable business practices of a number of corporate executives, which caused across-the-board declines in the value of stock in publicly-traded companies during the summer of 2002. The passage of the Act has been heralded by some as an historic occasion, some calling it a long overdue corporate reform package, while others have severely criticized the Act as an unnecessary overreaction by the government. This paper discusses the business conditions that prompted the passage of the Act, the accounting problems that made the Act necessary, the advantages and disadvantages of the Act, and the effect of the Act on the future of the accounting profession.

From the Paper:

"The Corporate Sector in the United States is already sufficiently regulated. Further regulation goes against the principles of a free market economy that is one of the basic principles of the country's economy. What was needed in the wake of bankruptcy scandals was stricter enforcement of the existing laws rather than creating new ones.
The Act was a knee-jerk reaction to the accounting scandals in a tiny percentage of businesses. The new reporting requirements of Sarbanes-Oxley will divert the attentions of managements and boards of directors to self-protection away from the business purposes of companies."

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