The main purpose of this research proposal will be to focusing on the Sarbanes-Oxley Act also known as SOX which was enacted on the 30th July 2002. The Sarbanes-Oxley Act was named after the two benefactors which are U.S Senator Paul Sarbanes and U.S Representative Michael Garver Oxley. This act was established after several high profile accounting scandals which occurred in the United States such as Worldcom and Enron the aim was to prevent such cases from occurring again in the future. To put the issue into perspective, the Enron scandal in 2001 resulted in many employees losing their jobs, thousands of employees and shareholders had lost their retirement accounts and shareholders lost a total of $74 billion. A number of accounting scandals have occurred both in the United Stated and the United Kingdom a study will be carried to determine how they were handled, whether anyone was held responsible and incarcerated and finally if any laws or acts were put in place and how they differed within the two countries. Although it has come under a great deal of criticism this is only expected when implementing a new system along with the negative aspects it also entails to have a positive impact within accounting which will be later discussed. The aim of this research is to have a comprehensive look at the background of the act and the process that was put in place to implement it within the United States.
The objective of the act is to protect the general public and shareholders from fraudulent activities and accounting errors and to improve the veracity of corporate disclosure. All public companies must now comply with the Sarbanes-Oxley Act. This act not only affects a company financially but it also affects the IT department as they will be managing the data and how long it is to be stored for. The SOX act has stated that all records within the business should not be stored for more than five years. If this is not complied with then there is a chance that they may be faced with fines, imprisonment or even both. The benefactors of the SOX act believed that it was fundamental to ‘restore public faith in published financial statements by assuring that accounting records were accurate and could be relied upon’ (Jahman & Dowling, The Impact of Sarbanes-Oxley Act, 2008). There has been a growing impression that these previous scandals could have been prevented if an agency was formed by the government to help monitor and prevent these inconsistencies in accounting. The debate still continues on whether the Act is efficient.
This research will be split into four sections: the first section will look at the background of Sarbanes-Oxley Act, the second and the third section will look at the benefits and the disadvantages as well as how the act implements good corporate governance and finally once having compiled this research we will be able to conclude whether it is capable of preventing future accounting scandals.
...(download the rest of the essay above)