SOX - A Cost/Benefit Analysis of The Sarbanes Oxley Act...

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A Cost/Benefit Analysis of The Sarbanes Oxley Act Objectivism vs. Ryan Petteruti GEB4455 November 22, 2010
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Petteruti2 Signed into law in July of 2002, The Sarbanes Oxley Act (SOX) was intended to restore public confidence in corporate financial statements. SOX addresses issues of accounting fraud by aiming to improve both the accuracy and reliability of corporate disclosures. Also important to note, SOX increased the liability of company executives and members of the board of directors. While many argue that it is unsuccessful today, almost everyone agrees that something needed to be done due to the massive outbreak of accounting fraud, most notably WorldCom and Enron. This paper analyzes both the costs and benefits of SOX’s implementation from an Objectivist Objectivism states that “reality exists independent of our minds, that human beings have direct contact with reality through sense perception, that the proper purpose of one's life is the pursuit of one's own happiness or rational self-interest, that the only social system consistent with this morality is full respect for individual rights, embodied in pure laissez faire capitalism, and that the role of art in life is to transform ideas into successful reality (Ayn Rand).” Advocates of Objectivism believe that SOX is corrupt and unfair. They believe that executives and board members’ complaints have a strong base in that they are unjustly held criminally liable for any improper or illegal actions taken by their employees. Rather than collecting evidence and holding cases for the individual executives who cheated, the government decided to spend a lot of money implementing SOX, making all individual executives prove to them that they were accounting for company transactions fairly. This idea greatly opposes Objectivists’ view because the government now has ultimate power over any and all companies’ books and records, allowing them to cast an “umbrella” over American business. Because Accounting is already so theoretical and sometimes unclear, this act puts more stress and liability on each business. Holding one person accountable for the actions of
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Petteruti3 hundreds or thousands or employees is also unfair. Accounting involves a lot of individual work and the processing of countless transactions. Even the smallest of errors or meaningful manipulations by a lower level employee can jeopardize the life of an executive. While there
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This note was uploaded on 03/16/2011 for the course FIN 4455 taught by Professor Christiansen during the Fall '10 term at FSU.

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SOX - A Cost/Benefit Analysis of The Sarbanes Oxley Act...

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