The Detrimental Effects of the Sarbanes-Oxley Act

In 2002, Senator Paul Sarbanes (Democrat Maryland) and Congressman Michael Oxley (Republican of Ohio State), a new law to further standardize accounting and auditing of companies that are publicly traded in the United States I crossed the aisle to develop. And financial report. Since the American people demanded reforms to deal with a wide range of fraud and corruption, the Sarbanes-Oxley Act (SOX) (also known as Public Accounting Reform and the Investor Protection Act of 2002) It was passed. A large American company.

Research and discussion of the 2002 Sarbanes-Oxley Act We clarify the main elements and the main objectives of the Sarbanes-Oxley Act of 2002. What are some of the criticisms surrounding the bill? Does this measure have economic impact on the company? Has the Sarbanes-Oxley Act achieved so far? Indirect and Direct Law The preparer of the financial statements has two choices, indirectly and directly when preparing the cash flow statement. Even in F.A.S.B., indirect methods are actually widely used. Indicates the priority of the direct method. Describes the similarities and differences between direct and indirect methods and the advantages of using each method.

Of course, the 2002 Sarbanes-Oxley Act attracted the most attention recently. The Sarbanes-Oxley Act was developed for companies such as World Com, Enron, Arthur Andersen. The Sarbanes-Oxley Act had a major impact on listed companies, but it brought a trickle-down effect. It requires that all listed companies reveal whether they have the ethics provisions of their CFO. The trend is that more and more companies adopt and use ethical guidelines.

There is nothing to deny the influence of the 2002 Sarbanes-Oxley Act. The Sarbanes-Oxley Act was developed for corporate accounting scandals in companies such as Enron, Tyco, WorldCom. The purpose of the Sarbanes-Oxley Act is to strengthen the oversight of accounting practices of listed companies, so that investors will not be affected by other Enron, Tyco, WorldCom.

With the development of the Sarbanes-Oxley method in 2002, the audit and accounting industry began to change. The Sarbanes - Oxley Act has changed game rules regarding fraud detection. Prior to the enactment of the bill, the auditing company was mainly subject to self-regulation, which turned out to be problematic. A company like Arthur Anderson says that fraud with a fraud company lacks integrity. As a result, the Sarbanes-Oxley Act established the Public Company Supervision Committee (PCAOB) to strengthen the oversight and supervision of accounting professionals. In 2004, fraud has cost $ 648 billion to the US economy, which is 20 times the cost of general street crime and shows the importance of a powerful fraud detection system .