Finance

Sarbanes-Oxley Act of 2002

LaGreasha Singletary

BUS 591 Financial Accounting & Analysis

Instructor: Richard Barrett

Tuesday December 11, 2012

Introduction

The Sarbanes-Oxley Act (SOX) of 2002 is an enactment by the United States Congress that seeks to avert fraudulent financial activities in American companies. This act has numerous components that seek to enhance financial accountability in American companies. Additionally, the SOX act provides a framework for stern penalties for individuals and companies who participate in corporate fraud.

The sponsors of this act were the then Maryland Senator, Paul Sarbanes and Ohio Representative, Michael Oxley (Porter & Norton, 2010). In the wake of heightened fraudulent activities in the United States corporate sector, there was the dire need to establish a comprehensive law that protects local and foreign investors. For instance, investors and shareholders had lost millions of dollars in the Enron corporate scandal.

Since the enactment of the SOX Act, company boards are required to maintain high standards of financial accountability as well as corporate diligence. Whereas the act has been heralded by many as an excellent platform for streamlining the American corporate sector, it has also elicited criticism from some quarters. For instance, some opponents argue that the SOX Act discourages foreign investors from venturing into the United States corporate sector.

This paper seeks to identify the most pertinent components of the SOX Act as well as its core objectives. Additionally, the paper will assess the various criticisms surrounding the SOX Act and the implications of its implementation. The Sarbanes-Oxley Act of 2002 is an effective framework for streamlining accountability in the United States corporate sector.

Components of the Sarbanes-Oxley Act

The SOX Act is subdivided into eleven main components and each has numerous sections. The first title...