On July 30, 2002, Congress passed with a near unanimous vote what is considered by many to be “the most comprehensive financial reporting legislation since the Securities Acts of 1933 and 1934” (Louwers at al., 2015). The Sarbanes-Oxley Act of 2002, commonly referred to as “SOX”, was named after its two main creators U.S. Senator Paul Sarbanes and U.S. Representative Michael G. Oxley. The Sarbanes-Oxley Act has a goal “To protect investors by improving the accuracy and reliability of corporate disclosures…” and was passed with the intent of ending self-regulation and increasing independence of public accounting firms, increasing internal controls, and management accountability and enhancing transparency in financial reporting and information.
…show more content…
The Act became a law very quickly due to the momentum from the scandals, despite the reservations by many in the accounting profession. The law is still relatively new, but now, over ten years after the Act initially passed, we are better able to evaluate the influence that the Sarbanes-Oxley Act had on the Auditing …show more content…
Also the increased protection for whistle-blowers led to more protection for corporate informants across the world, and therefore more controls for reliable financial information (Pompper, 2014). The law still has major critics. One major critique is that the cost of implementing the new internal control and compliance requirements outweighs the benefits received and that it does not consider the size or other industry factors for the company (Pompper, 2014). Because of these concerns, the SEC deferred implementation of section 404 for companies with market caps of less than seventy-five million. The PCAOB adopted Auditing Standard 5, which relaxed the attestation requirements that were initially adopted which significantly reduced costs (Coates, 2014). Despite criticisms, the Sarbanes-Oxley Act remains largely intact. The benefits are detailed in many studies and are summarized by Coates and Srinivasan, 2014. These studies have shown that firms now incorporate economic losses in a more accurate timeframe. Auditors have
The Act became a law very quickly due to the momentum from the scandals, despite the reservations by many in the accounting profession. The law is still relatively new, but now, over ten years after the Act initially passed, we are better able to evaluate the influence that the Sarbanes-Oxley Act had on the Auditing …show more content…
Also the increased protection for whistle-blowers led to more protection for corporate informants across the world, and therefore more controls for reliable financial information (Pompper, 2014). The law still has major critics. One major critique is that the cost of implementing the new internal control and compliance requirements outweighs the benefits received and that it does not consider the size or other industry factors for the company (Pompper, 2014). Because of these concerns, the SEC deferred implementation of section 404 for companies with market caps of less than seventy-five million. The PCAOB adopted Auditing Standard 5, which relaxed the attestation requirements that were initially adopted which significantly reduced costs (Coates, 2014). Despite criticisms, the Sarbanes-Oxley Act remains largely intact. The benefits are detailed in many studies and are summarized by Coates and Srinivasan, 2014. These studies have shown that firms now incorporate economic losses in a more accurate timeframe. Auditors have