Example Of The Sarbanes-Oxley Act Report
The Sarbanes-Oxley Act (also known as the “SOX” Act) was a bill that was passed in 2002 as a result of the political and economic scandals that gripped Enron, Worldcom, and a number of other important firms (Congress.gov). It was discovered that these firms were reporting false or inaccurate numbers to the federal government. When this was revealed, the companies collapsed, and many people lost a lot of money as a result. The SOX Act was designed to protect shareholders and other individuals with stake in companies—as well as the general public and the economy as a whole—against inappropriate financial reporting (Congress.gov).
The bill was sponsored by Senator Paul Sarbanes from Maryland and Representative Michael Oxley from Ohio (Congress.gov). This is particularly interesting, because not only was it a bill that was sponsored by both a House and Senate member, it was sponsored by a democrat and a republican (Congress.gov). The bill had success in both the House and the Senate, despite receiving some public backlash against the initial suggestions for the restrictions that were to be placed on companies as a result of the SOX Act. Many individuals who were pro-business suggested and continue to suggest that the restrictions put in place by SOX have not had the intended effects on overall business behavior. However, Congress suggests that there have been improvements in the reporting and overall adherence by businesses to the new rules and regulations set forth under the SOX Act.
Analysis: SOX, Business Regulation, and Capitalism
The United States has long supported the relative freedom of businesses to act in the ways that they see fit. However, over the years, those same businesses have repeatedly demonstrated that they are not necessarily to be trusted insofar as their ability to maintain good business ethics without oversight is concerned. After the Enron disaster, the United States Congress geared up to make sure that the general public as well as the government are both protected from businesses like Enron and Worldcom.
Business interests were not happy with the many new regulations put into place by the SOX Act. SOX has eleven sections, each of which deals with a certain kind of reporting or a check that a business must now adhere to as a result of the Enron scandal (Thomas.loc.gov). The first provision of the bill—the provision to create an oversight board for businesses—was formed in a bipartisan committee, in the hopes that the board could be independent from political interests. The hope was to ensure that businesses were held to a higher ethical standard for the greater good of the country, not only for some.
The bill also ensured that a number of provisions would be upheld to ensure that businesses could not pay off individuals or groups. Auditors now must be independent, for instance, which protects the auditor and the stakeholder, ensuring that the business is actually reporting the correct numbers. In addition, the bill allows for expanded penalties for people who break the rules of business ethics. This is extremely interesting from the perspective of America’s traditionally pro-business, capitalist society; it severely restricted businesses from doing things that they were accustomed to doing, and ensured greater financial protections for the market and the consumer in the process.
Congress.gov,. 'H.R.3763 - 107Th Congress (2001-2002): Sarbanes-Oxley Act Of 2002 | Congress.Gov | Library Of Congress'. N.p., 2015. Web. 2 Apr. 2015.
Thomas.loc.gov,. 'Bill Text - 107Th Congress (2001-2002) - THOMAS (Library Of Congress)'. N.p., 2015. Web. 2 Apr. 2015.
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