This law tries to keep corporations honest and fair

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This law tries to keep corporations honest and fair so that investors are not cheated Enron’s collapse set a precedent for this act o The financial havoc the bankruptcy had on shareholders and employees led to new regulations and legislation to promote the accuracy of financial reporting for publicly held companies SOX is essentially corporate accountability rules 2. What were the act’s objectives? Are these objectives realistic? Was new legislation the only way to address the problems? What evidence is there that SOX has achieved its objectives? The act aimed to protect investors from accounting fraud by companies. It was a tightening up, there were no regulations before. It aimed to introduce reforms in corporate responsibility, criminal punishment, accounting regulation, and protections. Section 302 requires senior management to certify the accuracy of the company’s financial statements, Section 404 requires that management and auditors establish internal controls and reporting methods on the accuracy of those controls, and Section 802 establishes rules for record keeping (destruction and falsification, retention period, and types of records that need to be stored). The objectives are too specific to be realistic – a better way to address the problem would have been something like the London Stock Exchange’s “watchdog” unit, which uses broad principles to ensure compliance with ethical standards. The focus should be on ensuring a company's financial soundness rather than entangling a corporate executive or its auditors in litigation. Exchanges did the same thing that the SEC implemented, so regulation wasn’t necessary. Exchanges got quicker at relaying information Investors sued Enron. A lot of civil law suits Those who committed felony fraud- faced criminal prosecution There is little evidence SOX has achieved its objectives - companies are reducing innovation and turning to overseas markets instead.
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If all of this had been in place before the scandal would it have happened? Yeah, it wouldn’t have made any difference. 3. What has been the impact of SOX on the accounting profession? Accountants used to be self-regulated but now must deal with a regulator from the Public Company Accounting Oversight Board- which audits their audits Auditors cannot do consulting work for the companies they audit now Accounting firms report directly to audit committee, not the management anymore NOT BAD FOR ACCOUNTING PROFESSIONS- IT HAS INCREASED THEIR DEMAND Nobody has yet shown that any of these changes would have prevented debacles like Enron or will do so in the future. Indeed, Enron itself had an independent audit committee headed by Robert Jaedicke, a professor of accounting at Stanford University, who could hardly have been more qualified for the job.
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