It should also be mentioned that the provisions under Sarbanes-Oxley are not universally welcome by accountants and managers. While some of the measures were inevitable, they also impose additional encumbrances on the business corporations. For example, a systematic study of managers’ opinions elicited mixed reactions.
“The interviewees unanimously agreed the legislation has many good aspects. Specifically mentioned as a good idea was the part of section 302 requiring top management to certify it had reviewed each quarterly and annual report. Furthermore, requiring management to certify that the financial statements–and other financial information included in the reports fairly present the issuer’s financial condition, as well as the results of operations, will force management to become more engaged in the financial reporting process.” (Moberly, 2007)
While there are more plusses than minuses, it would be premature to conclude that Sarbanes-Oxley has achieved its stated purpose. One should not expect the Act to be a panacea for improving financial reporting. It would be unreasonable to expect that fraud would be eliminated from Corporate America. Only in another five years’ time would researchers have enough time and data to perform longitudinal studies of the legislation’s effectiveness. The act can been deemed a success even if it reduces the magnitude of corporate crime (Green, 2005). In other words, making Corporate America crime free would be a Utopian dream; but frauds such as Enron and Lehman Brothers could be identified and thwarted at an earlier stage with greator vigilance from the regulators.
References:
Anatomy of a Credit Crisis. (2009). Australian Journal of Management, 34(1), i+.
Coustan, H., Leinicke, L. M., Rexroad, W. M., & Ostrosky, J. A. (2004). Sarbanes-Oxley: What It Means to the Marketplace; from Support to Apprehension, Accounting Professionals Express Their Thoughts. Journal of Accountancy, 197(2), 43+.
Culp, C. L. & Niskanen, W. A. (Eds.). (2003). Corporate Aftershock: The Public Policy Lessons from the Collapse of Enron and Other Major Corporations. Hoboken, NJ: Wiley.
Ex-Madoff Executive Pleads Guilty to Fraud. (2009, August 12). Daily Herald (Arlington Heights, IL), p. 2.
Green, S. (2005, March). The Limitations of the Sarbanes-Oxley Act. USA Today (Society for the Advancement of Education), 133, 66+.
HE STOLE FROM THE RICH, THEPOOR& THEINBETWEEN; Madoff’s Victims Hit out as the Conman Is Given 150-Year Prison Sentence. (2009, June 30). Daily Record (Glasgow, Scotland), p. 9.
Kohn, S. M., Kohn, M. D., & Colapinto, D. K. (2004). Whistleblower Law: A Guide to Legal Protections for Corporate Employees. Westport, CT: Praeger.
Lander, G. P. (2004). What Is Sarbanes-Oxley?. New York: McGraw-Hill.
Long, R. (2009, July 20). From the Desk of Bernard Madoff. National Review, 61, 41.
Longnecker, B. M. (2004, May). The Sarbanes-Oxley Act: Altering the Fabric of American Business. USA Today (Society for the Advancement of Education), 132, 28+.
Moberly, R. E. (2007). Unfulfilled Expectations: An Empirical Analysis of Why Sarbanes-Oxley Whistleblowers Rarely Win. William and Mary Law Review, 49(1), 65+.
More Arrests on Way over Madoff Scandal. (2009, June 30). The Evening Standard (London, England), p. 33.
Parles, L. M., O’Sullivan, S. A., & Shannon, J. H. (2007). Sarbanes-Oxley: An Overview of Current Issues and Concerns. Review of Business, 27(3), 38+.
Romano, R. (2005). The Sarbanes-Oxley Act and the Making of Quack Corporate Governance. Yale Law Journal, 114(7), 1521+.
SEC Chief Outlines Plan to Build Investor Confidence. (2009, July 15). The Washington Times (Washington, DC), p. A12.
Smith, R. C., & Walter, I. (2006). Governing the Modern Corporation: Capital Markets, Corporate Control and Economic Performance. New York: Oxford University Press.