Sarbanes-Oxley Act of 2002
In response to many of the recent corporate and accounting scandals, the U.S. government passed the Sarbanes-Oxley Act of 2002. This act has been a major effect of the Enron and WorldCom scandals that have negatively affected our country's whole economy. Many of these same types of scandals became present after the passing of SOX in July of 2002. Scandals like Enron and WorldCom gave a bad name to accountants and their profession. Since the release of Sarbanes-Oxley, the accounting profession has increased its stature in the eye of the public.
The act requires that the Securities and Exchange Commission puts into effect the new rulings and requirement into law. The most important piece stemming from the creation of Sarbanes-Oxley was the creation of the PCAOB (Public Company Accounting Oversight Board). The PCAOB is in charge of overseeing, regulating, and inspecting public firms in accordance with Sarbanes-Oxley. The largest issue coming from SOX is the issue of auditor independence. The act attempted to make it easier for employees to act as internal controls with confidential whistleblower lines and by keeping auditors separate from all other implementations of accounting.
Even after seeing the outcome and effects of this act, many believe that Sarbanes-Oxley has done more damage than help to some of the public companies of today. Others believe that it has brought many people to justice which has ruined the lives of tens of thousands of people. Techdirt.com, which is a leading website for views on the Sarbanes-Oxley act, states that "direct costs of compliance, the explosion in private equity and management buyouts, and pushing companies to become private" are all adverse ...