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Is Sox Working?

In: Business and Management

Submitted By shanec44
Words 663
Pages 3
Shane Connolly
Journal Article
ACT 301
December 17, 2014

Is The Sarbanes-Oxley Act Working?

This article written by Stephen D. Willits and Curtis Nicholls was printed in the CPA journal in April of this year. To give a brief history of SOX after the corporate fraud in the early 2000’s the SEC felt pressure to respond. Their response to the fraud committed my giant corporations such as Enron and WorldCom was the Sarbanes-Oxley Act. The main point of SOX was to try to limit or ideally eliminate corporate fraud by cracking down on self-regulating audit. The answer as to whether SOX is working or not is not as simple as yes or no. Some say that the scope of SOX was too wide while others maintain that it did not go far enough. The basis for the success of SOX comes down to cost versus benefit. Section 404 of SOX seems to have drawn the greatest criticism. Section 404 states that companies must issue reports concerning the internal control structure and the procedures for financial reporting. The purpose of this section was assessing the internal control and procedures of any company. The problem was the cost. Shortly after SOX was enacted companies (depending on size) report spending between 4 and 10 million dollars in order to comply with section 404. This number was expected to decrease as companies adjusted to the new laws; however there have been conflicting reports as to whether that has come to fruition. In respond to the political pressure the SEC was facing regarding section 404 they replaced it with a more relaxed version in 2007. The SEC went even further in 2010 by exempting smaller companies (less the 75 million in public float) from complying with section 404(b). One more step was taken in 2012 with the JOBS Act, which allowed companies grossing less than a billion dollars to also not follow section 404(b). One of the main criticisms for SOX…...

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