Unformatted text preview: 2. What role does the Sarbanes-Oxley Act of 2002 play in financial reporting? Are there possible shortcomings to relying solely on financial statement analysis to value companies? The Public Company Accounting Reform and Investor Protection Act, otherwise known as the Sarbanes-Oxley Act (SOX), was enacted in July 2002 after a series of high-profile corporate scandals involving companies such as Enron and Worldcom. SOX has a wide range of provisions and touches on many of the issues that arose during the business scandals. The Sarbanes -Oxley Act affects only American publicly traded companies and regulates what boards must do to ensure auditors' independence from their clients. The Act also creates and defines the role of the Public Company Accounting Oversight Board; a new entity empowered to enforce standards for audits of public companies. The Act explains processes for electing competent audit committee members and for ensuring that adequate reporting procedures are in place. In addition, it calls for regulations, and for ensuring that adequate reporting procedures are in place....
View Full Document
- Spring '11
- Finance, possible shortcomings, Sarbanes -Oxley Act