A Primer on Sarbanes-Oxley The Sarbanes-Oxley Act was declared a law in 2002 (Orin, 2008). The primary purpose of this new law was to convey meaning to restoring faith in corporate America’s financial endeavors (Orin, 2008). The Sarbanes-Oxley Act was meant to aid and protect investors, who suffered extreme losses because of corporations having poor financial performances, which was the case before the law was enacted (Orin, 2008). Distinctively, the Sarbanes-Oxley Act was meant to concentrate on accounting fraudulence by holding corporations accountable for disclosing accurate and reliable financial records. The Sarbanes-Oxley Act was also meant to ensure corporate executive leadership acted ethically throughout daily business (Orin, 2008).
Assess the Effectiveness of SOX Legislations
Key Ethical Components of the SOX To efficiently and effectively implement the Sarbanes-Oxley Act corporations need to broaden their views and focus on the greater purpose of the Sarbanes-Oxley Act. Beasley and Hermanson (2009) believe to accomplish this corporate leadership need to focus on the following: • Value the purpose of the Sarbanes-Oxley Act. • Comprehend the effect of fraudulence behavior. • Concentrate on ethical attitudes pertaining to rationalizing fraudulence behavior. • Making the Sarbanes Oxley Act the foundation to compliance to improve governance and control. • Investigate and implement enterprise risk management (para 5). Value the purpose of the Sarbanes-Oxley Act. Corporations must understand that no law is perfect and that there will be possible negative outcomes from any laws made. However, understanding and valuing the purpose of the law for the greater benefit of humanity is paramount (Beasley & Hermanson, 2009). This is so because if leadership does not see the virtue in the law then building an organization around the law(s) is impossible. Leadership must set aside personal sentiment towards the law to ensure the effective deliverance of governance, control orientation, and risk management throughout the company (Beasley & Hermanson, 2009). Comprehend the effect of fraudulence behavior. Executives have to understand the drawback of committing fraudulence financial acts on their company. There are three key factors that executives must omit to ensure they are ethically guiding the company from fraudulence behavior: • Incentive • Opportunity • Attitude/Rationalization First issue is analyzing why executives commit financial fraud or plainly what incentives do the executives have in committing fraud. It is commonly known that executives receive benefits from the performance of the company (Beasley & Hermanson, 2009). Many executive receive compensations such as stock options and bonuses for meeting or exceeding expectations. The pressure that is placed on executives can be good for the advancement of the company, but bad when the company is falling short of expectations and the executive still wants to receive their compensations for their time and effort put into the company (Beasley & Hermanson, 2009) The second issue is addressing the opportunity that executives have to commit fraud. Beasley and Hermanson (2009) states, that the best deterrent to an executive seeing opportunity is strong internal controls (para 7). Section 404 of the Sarbanes Oxley Act primary focus was to address controls that should govern daily business processing and asset protection ((Beasley & Hermanson, 2009. Also, when preparing company financial statements the controls must address the use of estimates and assumptions (Beasley & Hermanson, 2009). The last issue deals with executives rationalizing their fraudulent financial behaviors as something positive (Beasley & Hermanson, 2009). Corporations have to make a zero tolerance policy to ensure that their executives have no reason to commit to any kind of fraudulent behavior. Leadership must understand that matter the circumstance financial fraud should not be the answer to saving jobs, meetings company quotas, or just because leadership thinks it is best at that very moment (Beasley & Hermanson, 2009). Concentrate on ethical attitudes pertaining to rationalizing fraudulence behavior. The rationalization of fraudulence behavior by leadership within the organization could spell a disaster for any company (Beasley & Hermanson, 2009). Higher management could begin to rationalize why they believe fraudulent behavior was appropriate and necessary for the enhancement of business. Beasley and Hermanson (2009) describe this as a process of interpreting “gray zone areas” of the company. This is when the process that the executives are using to boost revenues is not clearly stated to be an excepted way of conducting business, however, it is also not clearly stated to be an inappropriate way of conducting business neither (para 9). To limit these occurrences corporations must determine any unclear areas within their financial departments. Corporations must strengthen their controls from within to ensure when these unethical practices arise there is an individual in place to “whistle blow” so that the endeavor is stopped and corrected (Beasley & Hermanson, 2009). Making the Sarbanes Oxley Act the foundation to compliance to improve governance and control. Corporations that do not completely adopt the Sarbanes Oxley Act will never reap the full benefits of the implementation of the law (Beasley & Hermanson, 2009). When companies do not accept the laws meant to help the economy, red flags should rise and the company should be questioned on if they are creating an ethical environment that is clear and free from fraudulent financial behaviors (Beasley & Hermanson, 2009). In addition to making the Sarbanes Oxley Act the foundation of fraudulent prevention corporations take greater measures to explore and seek out any potential fraudulent acts (Beasley & Hermanson, 2009). Once these possible acts are discovered it is up to the corporation to device plans address and prevent these uncontrolled acts (Beasley& Hermanson, 2009). Investigate and implement enterprise risk management. Beasley (1999) describes enterprise risk management as: Enterprise risk management is a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.
Risk management is the process of a company seeking out the potentials harmful happenings that would jeopardize the goals of that particular company (Beasley et al, 1999). Enterprise risk management is a process that not only re-enforces the Sarbanes Oxley Act, Enterprise risk management seeks to build on the internal controls that corporations should already have established to prevent financial fraudulence (Beasley & Hermanson, 2009).
Social Responsibility Implications Regarding Mandatory Publication of Corporate Ethics Every company that is providing a service to the economy has the social responsibility to ensure that the company is ethically doing business to protect all parties involved in their business. A worldwide study of 58 countries by Ioannou and Serafeim (2012) suggest that companies that implement mandatory publications increase their social responsibility and employee effectiveness at work because there are limited amount of opportunity to stray from the goals of the organization (p. 6). Also, the study shows that companies that have already implemented such tactics result in better ethical practices, decreases in financial fraudulence, and trust in executive leaders strengthens throughout the organization (Ioannou & Serafeim, 2012). It should be noted that these results stem from economies that have stronger law enforcements and can offer credible sustainability reports from the countries organizations (Ioannou & Serafeim, 2012).
Does the Sarbanes Oxley Act present burdens on smaller organizations? The enactment of the Sarbanes Oxley Act when implemented by the Securities and Exchange Commission helps to aid not only investors, but securities issuers too (Rose, 2005). Based on this there would seem to be an unbalanced costs and benefits for smaller corporations because of new regulations implemented by the Securities and Exchange Commission (Rose, 2005). Rose (2005) talks about how the Exchange Act to over the counter bulletin board companies (OTCBB) and the adoption of Regulation Fair Disclosure have drastically affected the access to capital markets pertaining to cost for small corporations (p. 102). These regulations drove smaller corporations to leave the public sectors and become private companies (Rose, 2005). However, the Securities and Exchange Commission foreseen this as a possible outcome because they felt if a company was not willing to provide disclosure then they probably had something to hide (Rose, 2005). After extensive investigations one can concur that these new regulations do directly effect on smaller corporations going private (Rose, 2005). Although, the Securities Exchange and Commission developed a panel to examine the effects the Sarbanes Oxley Act was having on smaller corporations. Also, the Securities Exchange and Commission investigated how their regulations effect different organizations of certain sizes (Rose, 2005). With these types of actions from the Securities and Exchange Commission I am forced to believe that the Sarbanes Oxley Act whether it is directly or indirectly, does burden smaller organizations to some extent.
Improvements of the Sarbanes Oxley Act The Sarbanes Oxley Act provides a foundation on a road to protect investors, consumers, etc. from fraudulent financial behaviors. If companies choose to go private as a result of regulations then there should not be any convincing of them staying public (Rose, 2005). When these companies suffer extreme loses then it will fall upon the company and their staff oppose to weighing down an economy of hardworking taxpaying citizens. However, it is necessary to build programs and processes to reinforce the Sarbanes Oxley Act (Rose, 2005). Vandekerchhove and Lewis (2011) discuss whistle blowing pertaining to business ethics in corporations. The talk about how in certain instances whistle blowing is not taken serious anymore because the employees who are doing the whistle blowing are not protected from the other employers or they do not possess adequate proof of the actions being questioned (p. 18). Furthermore, corporate leadership should be examined closely by boards such as the Securities Exchange and Commissions. For these companies that are public each executive should be under review and the data should be available to investor so that they investors know what they can potentially except from any particular company (Rose, 2005). By placing a magnifying glass on these corporate executives if forces them to manage with ethically sound judgment and not dictate fraudulent actions. Concluding Statement The Sarbanes Oxley Act enactment of 2002 may not be a perfect law placed upon the business economy. Executives may disagree with the contents of the Sarbanes Oxley Act and choose to continue to make their own rules and regulations to govern their corporations. However, with such disasters such as the Enron and Subprime Loans trials, the government has a social responsibility to the population of America to take greater measures to ensure the economy does not suffer for the wealthy greed of a few executives in our nation. Regulations and Laws such as the Sarbanes Oxley Act should be implemented, revised, and then reinforced by other initiatives to assure the public that these corporations are taking unfair advantage of our economy (Beasley & Hermanson, 2009).

References
Beasley, M.; Carcello, J.; Hermanson, D.; Neal, T. (1999). Fraudulent Financial Reporting 1998-2007 An Analysis of U.S. Public Companies. COSO. Retrieved from: http://www.coso.org/documents/COSOFRAUDSTUDY2010_001.PDF
Beasley, M. & Hermanson, D. (2009). Going Beyond Sarbanes-Oxley Compliance: Five Keys to Creating Value. The CPA Journal. Retrieved from: http://www.nysscpa.org/cpajournal/2004/604/perspectives/p11.htm
Ioannou, I. & Serafeim, G. (2012). The Consequences of Mandatory Corporate Sustainability Reporting. Harvard Business School. Retrieved from: http://www.hbs.edu/faculty/Publication%20Files/11-100_35684ae7-fcdc-4aae-9626-de4b2acb1748.pdf
Orin, R.M. (2008). Ethical Guidance and Constraint Under the Sarbanes-Oxley Act of 2002. Journal of Accounting, Auditing & Finance, 23(1), 141-171.
Rose, P. (2005). Balancing Public Market Benefits and Burdens for Smaller Companies Post-Sarbanes-Oxley. Willamette Law Review, Vol. 41, No. 3, Summer 2005. Retrieved from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=668062
Vandekerckhove, W. & Lewis, D. (2011). Whistleblowing and Democratic Values. The International Whistleblowing Research Network. Retrieved from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1998293#page=12