Trends Established by the Sarbanes Oxley Act

Abstract

The Sarbanes Oxley Act of 2002 was enacted in reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals cost investors billions of dollars when share prices collapsed, and shook public confidence in the U.S. securities markets.

In the twelve years since the bill was passed, companies have been trying to determine what the most effective methods are to maintain compliance, bring value and manage general program costs. Key SOX compliance trends will be discussed further in the pages that follow as well as the challenges individual companies have been confronted with in trying to meet said requirements.

It is self-evident that corporate directors and officers owe a fiduciary duty of care to the corporations that they manage. While Courts and other monitoring bodies have reshaped the parameters of that duty throughout the years, at its core, the duty is designed to ensure that top managers govern in good faith and in the best interests of the corporation.

The Sarbanes Act may be deemed as a well received affirmation of strict requirements for corporate managers. However, there have also been some concern that have been not so well received, specifically in regard to compliancy, which comes along with rising costs, a variety of challenges, and even a resurgence in certain industries such as forensic accounting.

In response to the perception that stricter financial governance laws are needed, SOX-type regulations were subsequently enacted in Canada (2002), Germany (2002), South Africa (2002), France (2003), Australia (2004), India (2005), Japan (2006), Italy (2006), Israel and Turkey. We will also discuss why organizations need to understand how the financial reporting process works and how to identify the areas where technology plays a critical role.

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The Sarbanes–Oxley Act of 2002 also known as...