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Sarbones Oxley and Its Implecation

In: Business and Management

Submitted By shams319
Words 2150
Pages 9
Advanced Auditing

Shams Kamal

Assignment 1
Professor Whisenant

MEMORANDUM September 14, 2011
TO: Johnny Whisenant
FROM: Shams Kamal
SUBJECT: Summary of John C. Coates article, “The goals and the promises of Sarbanes-Oxley Act”.

On July 25, 2002 the date when stock market indices were making a new history against over publicized corporate scandals, bankruptcy and accounting misstatements, the new legislation “The Public Committee Accounting Reform and Investor Protection Act of 2002” widely known as Sarbanes Oxley Act was passed by the congress in response to investment company abuses. On the article, “The goals and the promises of Sarbanes-Oxley Act”; John C. Coates, professor of Harvard law & economics school analyzed the pre and post Sarbanes Oxley era and the pros and cons of the SOX legislation. In addition, he recommended that by reconstituting governance and accountability of PCAOB, implication of Sarbanes Oxley can be more effective to safeguard net long term socioeconomic market gain.

While discussing about the enforcement in pre Sarbanes Oxley era, Coates pointed out the previous laws and regulations lacked effective implementation of corporate governance. With the threat of systematic corporate misstatements, frauds and rise in significant class action suits, in the pre SOX era investors’ confidence were dramatically declining. As in such scenarios in last decade, Coats describe the core goals on which SOX were formed. First, on its core, “SOX legislation was designed to fix the auditing of U.S public companies.” Second, Sarbanes Oxley was predominantly designed to regulate the “deprofessionalization” of auditors as there was significant number of audit failure by top audit firms.[Coates 93, 2007] He marked several reasons behind the failure of auditing...

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