The Sarbanes Oxley Act - 1162 Words

In the begging of 2000’s after a period of corporate scandals involving large public companies, senate enacted the Sarbanes-Oxley Act, which is referred to as SOX or Sarbon. The act was enacted 14 years ago on July, 30 2002. Also this act was known as the â€Å"Public Company Accounting Reform and Investors Protection Act of 2002.† There are many serious accounting and corporate scandals that influenced companies Tyco International, Global Crossing, Enron, WorldCom. For instance the bankruptcy of â€Å"ENRON† in 2001 was the one of largest bankruptcy in the U.S. history. That time investors lost $74 billion and thousand employees losing their jobs, retirement savings and medical plans. The time during the scandals happened, where the mentioned†¦show more content†¦The study of their complicated cases made to create new public demand for reform. Before the congress enacted this act, there were dozens cases of auditor conflicts of interest. SOX gives public companies new, exact and limited derectives. Prior to SOX auditing companies, accounting profession, chief financial supervisors from investors side were largly self-regulated. They also performed essential consultancy or not related to audit work for the companies they performed to audit. All consulting services were based on agreements many of which were far more profitable for auditors than that of the auditing services provided. This is factual representation of the conflict of interest. There were also problem in board. Board members also involved in scandal. Boards of Directors, especially Audit Committees, are made some mechanisms were financial reporting parts for investors were oversight. They either didn’t perform their obligations, responsibilities or didn’t understand business complex duties to perform their work. Audit Committee members were much dependent on management as should be and they were not perform independent decisions. Stock market analysts, who make decision buy or sell company bonds and stock, and investment bankers that give companies loans or handle mergers and acquisition are another conflict. Banking practices conflict leading to a firm lends