Ethics and Law in Business and Society. History and Implementation of Research Paper

Ethics and Law in Business and Society. History and Implementation of SOX - Research Paper Example However, there are those who say that the price is not commensurate to the benefits that the law appears to be bringing to the corporate world and especially when it comes to the high compliance costs. History and Implementation of SOX: Following several high profile accounting scandals in the 1990s and particularly the infamous Enron and WorldCom scandals, the ensuing intense soul-searching in the US corporate world concluded that effective safeguards needed to put in place if a repeat of the two scandals was to be completely obviated and if the investor confidence was to be restored. This is how the Public Company Accounting Reform Protection Act, the so-called Sarbanes-Oxley Act was conceived. Enacted in July of 2002, the Sarbanes Oxley Act was informed by need to put an end to corporate scandals and particularly to restore the public confidence in the capital markets (Roberts, & Mahoney, 2004). According to Section 404(a) of this Act, the management ought to not only assess but a lso report on the effectiveness of the business internal controls over financial reporting (Roberts, & Mahoney, 2004). ... There are a number of laws governing SEC, however and after the 1940’s Investment Adviser Act, SOX is arguably SEC’s most recent law that it is charged to oversee. Other than SEC, SOX has implementation power that it exercises through the US Department of Justice whose primary function is to prosecute the federal crimes that are associated with acts like; conspiring or even attempting to commit fraud, verifying false financial statements, destroying or tampering with documents, and retaliating against whistleblowers (Heath, & Norman, 2004). In corroboration with the office of the Attorney General, the FBI (Federal Bureau of Investigation) is charged with the responsibility of investigating crime related with corporate fraud while still retaining its mandate as the only detective agency that can investigate and apprehend those accused of committing corporate bad behavior (Heath, & Norman, 2004). SOX immense power can be looked from its Titles that include; acting as a Pu blic Company Accounting Oversight Body; enforcing the independence of auditors; policing corporate responsibility; improving financial disclosures; analyzing conflict of interest; upholding the accountability of corporate and criminal fraud; and enhancing penalties on white collar crimes (Brannick, & Roche, 1887). According to Section 404 of the Sarbanes-Oxley Act, SEC was to adopt rules requiring the management of all companies with publicly traded securities (apart from registered investment companies) to annually report their assessment of the effectiveness of their internal controls as well as an auditor’s independent confirmation of the effectiveness of the said internal controls. Adopted on 27th March 2003, these rules laid out