Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 has had a significant impact on corporate business in the USA. Admittedly, it has supporters and opponents who discuss the positive and negative outcomes of the law. However, researchers agree that enactment of the law was inevitable.

The US business world was shaken by several scandals concerning such corporations as Enron, WorldCom, Tyco, and many others during 2000 and 2002. The scandals were associated with several frauds and inadequate reporting which led to billions of losses for these corporations and their stakeholders as well as the entire market of the USA.

It became obvious that audit companies that were supposed to provide effective audit services failed to achieve their goal due to poor management and conflict of interests. Furthermore, corporations’ board management was also poor, which contributed greatly to the crisis of trust in the market. Therefore, Sarbanes and Oxley came up with a law that was aimed at enhancing control over corporations through the introduction of several regulations.

It is noteworthy that the law affects all stakeholders involved. It is aimed at enhancing individual responsibility. Senior executives have to follow regulations and make sure that corporate financial reports are accurate. Auditors (companies as well as audit officers) are also responsible for providing comprehensive and valid information on corporations’ operations.

More so, it also involves investors and shareholders as they are bound to report on conflicts of interests they are aware of. Importantly, the law describes particular penalties which can be imposed if violations take place. It is possible to state that SOX affects the development of the US market as it increases investors’ confidence in corporations and they are ready to invest more.

The law affects all stakeholders and it is rather comprehensive and effective. However, some researchers note that it also has several negative outcomes. In the first place, it is necessary to note that opponents of the law stress that it provides a heavy burden for businesses as numerous regulations slow down the development of businesses.

It is argued that extensive control over corporations decreases their competitiveness with foreign companies. Moreover, they emphasize that this control is quite costly. Finally, they also state that the number of corporations decreased as lots of companies do not go public to escape from the control.

Irrespective of its flaws, the law is effective. In the first place, the enactment of the SOX has decreased cases of violations. Corporations have become more responsible and provide accurate financial reports. Board management has become more effective as well. One of the most important outcomes of the law is increased confidence of investors in corporate statements. This confidence positively affects the development of corporations. Notably, similar laws were enacted in other developed countries, which can be a sign of its effectiveness.

On balance, it is possible to state that the SOX is an effective law as it managed to improve the situation with corporations and increase the confidence of investors. The law imposes a set of regulations that are aimed at decreasing violations in the corporate business market. The law is also associated with certain criticism as researchers report that it led to a certain reduction of the number of corporations. Nonetheless, positive outcomes overweigh the negative effects and the law is still seen as an adequate and effective measure.

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