The 2002 Sarbanes-Oxley Act

Paper Summary:

This paper explains that the Sarbanes-Oxley Act (July 2002) is a weak attempt by Congress and the Securities and Exchange Commission to make meaningful changes in the oversight of public companies. The paper relates that the future of the accounting profession will be different under the Sarbanes-Oxley Act because auditors will report to an audit committee, not management; auditors will no longer be allowed to offer many non-audit services to the client; and the lead audit partner and audit review partner must be rotated every five years. The author has serious reservations regarding whether or not Sarbanes-Oxley does enough to change the underlying root cause of accounting irregularities and believes that more research is needed.

From the Paper:

"Although many department chiefs already are stepping up Sarbanes-Oxley Act compliance activity throughout their organization, most say they feel like they are just going through motions. And, few finance executives believe Sarbanes will do much to restore investor confidence. In a PricewaterhouseCoopers survey, eighty-four percent of executives reported that Sarbanes has changed control and compliance practices at their companies,though not significantly. And, more than half contend the new law simply formalizes what their company had been already doing anyway."

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