Sarbanes Oxley Act

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Running head: THE SARBANES-OXLEY ACT: A REVIEW OF THE LITERATURE 1

The Sarbanes-Oxley Act
Matthew Gurniak
University of Maryland University College

Author Note
This paper was prepared for AMBA 630, Section 9046, taught by Professor Wylie.
Introduction
American investors lost confidence in the American market, as a result of several large companies falsifying financial statements. In response to this matter, Congress passed the Sarbanes-Oxley Act (SOX) in the year of 2002 (Rehbein, 2010, p.90). Though there are many benefits that have come out of SOX, many argue that there are several issues that should be addressed. As a team we will discuss the main advantages and disadvantages of the act, the effect the act has had on CEO’s and CFO’s of publicly held companies, how the act has affected the function of internal controls within organizations, and what changes should be made to act.
What Are the Main Advantages and Disadvantages of SOX? The Sarbanes-Oxley Act (SOX) has many advantages. There are repeated ethical scandals in business and the majority of the time “ethics and the law run parallel” to each other (Livingstone, 2009, P. 4). The SOX is the first step in holding companies accountable and is a model for accounting practice reform. The SOX controls auditors’ independence and responsibility by fighting business fraud and improving corporate governance. Tsui (2009) stated that “the SOX increases personal liabilities of senior management and introduces extremely cumbersome compliance processes” (p. 22). Raghavan (2007) explains that: “In CFO Research Services’ survey of 180 finance executives in August 2005, increased management confidence in the accuracy of the financial reports due to SOX requirements on documentation, monitoring, and enforcement of controls was cited as the primary benefit of the compliance…...

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