Business Law
The Sarbanes–Oxley Act of 2002, more commonly called Sarbanes–Oxley or SOX, is a United
States federal law that set new or expanded requirements for all U.S. public company boards,
management, and public accounting firms. Several provisions of the Act also apply to privately
held companies, such as the willful destruction of evidence to impede a federal investigation. The
basic idea of this act was taken by the world to reshape the laws to manage and govern the listed
companies. Please read about this law and answer the following questions.
1.
What led to the initiation of such an act in the USA?
Before the Sarbanes Oxley act was passed in 2002, the Securities Act of 1933 regulated
securities. It was necessary for the companies to publish a prospectus about any publicly-traded
stocks it issued. The corporation and its investment bank were legally responsible for telling the
truth, including the financial statements. Even though the corporations were legally responsible,
the CEOs were not. So, it was difficult to prosecute them. There were huge losses of this to the
companies. Sarbanes-Oxley act addressed the corporate scandals at Enron, WorldCom, and
Arthur Anderson. It prohibited auditors from doing consulting work for their auditing clients.
That prevented the conflict of interest which led to the Enron fraud. This led to the SOX as
congress response to the Enron media fallout, a lagging stock market, and looming reelections.
Maryam Shah Bano
2.
What were the benefits, which were obtained by the organization after the
implementation of this act?
When the companies started implementing this act it was very expensive and time-consuming.
But the companies with a vision in the second year notices that it got less expensive and difficult.
Also a source of useful operational knowledge, less cost and increasing efficiency. The areas of
improvement were as follows:

Strengthened control environment

Easy compliance with other statutory regimes

Reliable documentation

Less complex organizational processes

Effective use of manual/automatic controls.

Standardized process for IT.

Better internal controls with partner companies.

More audit committee involvement.
This all leads to the acts main purpose: increased shareholder value and rights.
Maryam Shah Bano