Sarbanes and Oxley Act 2002
Sarbanes-Oxley Act 2002Edgar Alanh LalataSullivan UniversityAccounting ISarbanes and Oxley Act 2002The term Sarbanes-Oxley stands for Senator Paul Spyros Sarbanes, a Democrat from Maryland with thirty-one years of experience in the Senate at the time when the Act was drafted and later became the law in 2002 and Michael Garver Oxley, a Republican who represents the 4th Congressional District of Ohio in the U.S. House of Representatives. The term is often shortened to SOX. The main purpose of the Act is to protect investors by improving, and increasing the accuracy, and reliability of all of the corporates financial disclosures made pursuant to the securities laws and for many another purpose. It created new standards for corporate accountability as well as new penalties for wrongdoing. The act was translated by many as a direct response to the financial mismanagement of companies and businesses and it irrevocably changed the way files should be stored within their capabilities. It lays down a new set of rules and regulations as well as strict guidance on how pertinent documents should be handled and could inflict a serious consequence to companys and businesses that elect to break the law. It also enables the law and its authority to ensure that all important documents are being handled with appropriate care, and it is traceable within the companys file management personnel.
“Corporate code of ethics in businesses does not merely establishes the rules and standards that govern moral behavior of individuals and groups especially when it comes to money and power” (Richman, 2012, p.241). Many honest people were affected from the dishonesty of others, innocent individuals and group of people suffer when people cheat. Cheating is all too common in a business world; companies doesnt usually run an honest operation one hundred percent of the time. There is always a need to get ahead from other competitors to make more profit for themselves to support their lavish lifestyle. Increasing the numbers more favorable to financial executives and their allies of diverse people are common. Creating false claims makes them believe that they are not doing anything wrong because the numbers are going to be in their favor to which their primary goal is accomplished.Congress recognized SOX as the “Public Company Accounting Reform and Investor Protection Act” (in the Senate) and “Corporate and Auditing Accountability and Responsibility Act” (in the house). Two outstanding political figures contended SOX, Congressman Ron Paul, and former Alaskan governor Mike Huckabee. Both political figures clearly stated that this was a mistake because it is not only unnecessary but also a deterrence from foreign firms and investors, according to a speech by Paul in 2005. These regulations are damaging American Capital Markets by providing an incentive for small US firms and foreign firms to deregister from US stock exchanges. SOXs lack of popularity from political figures, small businesses, and foreign firms grew immensely during the 2007-2010 financial crisis.