Essay: Regulations Regarding the Sarbanes Oxley Act

Sample Essay

After all these rules and regulations regarding the Sarbanes Oxley Act, the investor or any neutral party would expect that the degree of fraudulent behavior among companies would register a drastic decrease. However, this has not been the case. A recent report discovered that in companies where SOX was implemented incurred larger losses that were a result of accounting fraud as compared to those companies which had not implemented these controls. Furthermore, the companies that applied SOX also had to incur time costs as the duration of fraud detection is larger in these companies as compared to those who do not have the controls in place (Rappeport, 2008).

These points raise a huge concern for the corporations regarding the usefulness of the SOX and the severe burdens it places on the companies. The time to detect fraud is larger which means that the guilty parties have a greater chance to escape. And the magnitude of the theft is also larger.

Also important is that while the SOX had been successful in curbing fraud at the lower levels of the hierarchy, it failed to do so at the senior management level because the internal auditors of the company in question report to the higher ups directly and were influenced by them (Rappeport, 2008). This is a major problem as many of the scandals and frauds such as Enron have been committed by senior level executives.

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