The Sarbanes-Oxley Act

Résumé du document

The Sarbanes-Oxley Act is one of the most important pieces of legislation affecting corporate governance and the practice of public accounting since the US securities laws of the early 1930s. The Act is relatively recent in the history of American accountancy. It was signed into law on 30 July 2002 by President Bush. The Act was named in reference to Senator Paul Sarbanes and Representative Michael G. Oxley who were mainly responsible for the creation of such an important law. The main purpose of the Act is to protect shareholders and investors by inspecting and monitoring companies. In order to achieve that goal, the Act requires public companies to improve the accuracy and reliability of corporate disclosures, by "certifying" truthful financial information. It is important to notice that the Act is made for all the companies which are publicly traded on the American financial markets: even for the smallest ones and even for the foreign companies.

Extraits

[...] Some Articles about the Impact on smaller companies: LARRY E. RITTENBERG, “Internal Control: No Small Matter”, Internal Auditor NIKKI SWARTZ, “Small Firms Seek Different SOX Rules”, Information Management Journal, January/February 2006. NIKKI SWARTZ, “More SOX Delays for Some Firms”, Information Management Journal, November/December 2006. ANTHONY S CHAN, “Sarbanes-Oxley for Small Businesses: Leveraging Compliance for Maximum Advantage”, CPA Journal, March 2007. [...]

[...] Finally, the Sarbanes-Oxley Acts makes mandatory for the top executives and for the CEO the publication of any purchases or sales for company's stocks within a delay of 2 days. Recent issues relating to the Law Issues have been raised concerning the workings and impact of this law: I will study 2 of them: - The cost of the Sarbanes-Oxley Act for companies: Everyone admits now that the 2002 Sarbanes-Oxley law has been a success. However the impact of the Act is still a problem for some companies especially because of the costs. [...]

[...] The purpose of the Sarbanes-Oxley Act is also to ensure the board of directors of publicly held companies takes responsibility for receiving accurate information about the company's finances. Indeed the CEO of each publicly traded company has now to “certify personally” the company's finances which are presented every year to the shareholders. All the stock options of the publicly traded companies have now to be written the balance sheet of the company's finances”. The Sarbanes-Oxley Acts also affects accounting firms and their auditing standards. Indeed the Act covers auditor independence. [...]

[...] It is important to notice that the Act is made for all the companies which are publicly traded on the American financial markets: even for the smallest ones and even for the foreign companies. The reason for the creation of the Sarbanes-Oxley Act The Act was signed in the wake of the Enron and WorldCom scandals. Indeed Enron which was the 7th biggest American company with a market capitalization of 100 billion dollars became a bankrupt business in December 2001. [...]

[...] Conclusion The Sarbanes-Oxley Act is a good law for investors because they have now a protection against the previous power of the CEO and of the corporate finance in general. However, big companies face major difficulties because of the cost of the Act for the firms. And it is even worse for small business management who encounters problems in using information technology, realizing board and audit committee recruitment, and achieving the right level of the quality of internal controls. References ome Internet Websites Some information from a Website dedicated to the Sarbanes Oxley Act: http://www.aboutsarbanesoxley.com/ Some basic information about all the changes from a Website: http://knowledgehills.com/Sarbanes/sarbanes- oxley.aspx?ref=aw&mt=broad&skw=sarbanes%20oxley&bkw=sarbanes_oxley&gclid=CJ- k5or83osCFQlQWAod7lJocQ Some data from another Website dedicated to the Sarbanes Oxley Act: http://www.sarbanes-oxley-guidelines.com/ Some Articles about the cost of the Sarbanes-Oxley Act: PAUL A SHARMAN, Winding Road of SOX Compliance”, Strategic Finance, January 2007. [...]