Abstract The Sarbanes-Oxley Act (SOX) was created in 2002 in response to the financial scandalsthat occur during 2001especially the failure of Enron. The purpose of the law was to restore public confidence and hold companies responsible for their actions. The legislation established accounts reporting practices for financial institutions and public accounting firms that perform audits for publicly traded companies. This paper will describes the main aspects of the regulatory environment which will protect the public from fraud within corporations with a a main concentration on The Sarbanes-Oxley Act of 2002 (SOX and will evaluate whether The Sarbanes-Oxley Act of 2002 SOX will be effective in avoiding future frauds.
In the late nineties, a set of accounting and financial scandals impacted the capital markets (Enron, World Comm and Tyco). The common denominator in these cases was the use of "accounting techniques" that masked and hidden financial problem, which came to be billions of dollars, reflecting a lack of transparency in corporate governance, accounting, and financial situation. It also impacted the economy many of the employees that worked for these companies were rip off their pension and benefits. Investors begin to doubt the veracity of the information outlined in the financial statements. In response to this type of fraud was introduced the Sarbanes-Oxley Act of 2002 the law commonly known as SOX, which is named after the two congressmen who contributed to drafting. This law was designed and written with the purpose of increasing the financial transparency of companies listed on the U.S. stock market, thereby protecting investors, shareholders, and the public; demanding reliability, responsiveness and accuracy of financial data. Its purpose is to prevent conflict of Interest between the auditing firms and the top management of a company. This law also...
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