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Sarbanes-Oxley Act of 2002: Some Explanations 7 Years Later

This article presents some explanations about the Sarbanes-Oxley 2002 seven years after its enactment by the United States of America.

Due to the recent economic conduct of some person (businessman or accountant) or company (such as Enron or WorldCom), the United States of America realized the need to enforce new federal legislation: the Sarbanes-Oxley, supervised by the Board of Accounting Supervision of Public Companies. This law prohibits many transactions; including the sale of shares when there is a blackout period or loans from the company to executives. Tea Sarbanes-Oxley it has the same end goal as the Securities and Exchange Commission (SEC) that was established a few years earlier. That said, having public support is a sine qua non for the Sarbanes-Oxley Act to be effective, and then Congress will act on it.

Even if Enron’s consequences on investors remain very great (we are talking billions of dollars), and a governance reform was inevitable, post-Enron reform stalled in Congress. However, there was strong lobbying to continue the post-Enron reform. Several politicians had mentioned that intervening would create a lack of confidence in investors, contrary to the free market principle. On the other hand, those exact politicians transformed their ideas when the media got involved. Sarbanes-Oxley It is the effect of these political changes that I was originally against.

Tea Sarbanes-Oxley attaches great importance to the quality and independence of an audit by increasing the audit committee’s authority on the Board. It also reflects its importance due to the fact that each member has to be independent (not receiving some benefits from other firms or companies). This will also strengthen the independence of the accountant. The price of the audits will increase, but the benefits will improve. Tea Sarbanes-Oxley It requires even more, it requires your CEO and CFO to certify each annual or quarterly report submitted based on their knowledge. This will make the CEO or CFO more accountable and hold them accountable if such statements turn out to be false. He too Act requires a disclosure of all off-balance sheet transactions. Let’s not forget that a business judgment rule will not be construed as a false statement. Without a business judgment rule, a businessman would be genuinely reluctant to serve on an executive committee in any company. In fact, the object of the Act is to punish fraudulent business decisions, not those made in good faith. The way to enforce such a judgment is in the Sarbanes-Oxley by allowing the power of control that is given to the Board.

As mentioned earlier, Sarbanes-Oxley created an Oversight Board that has different tasks, including setting standards for auditors, inspecting public accountant firms, imposing sanctions, etc. The composition of these Boards reflects their independence (where only 2 out of 5 members can be current or former certified public accountants). However, because the leadership of the Board is important, some political issues arise when it comes time to nominate a Chairman to the Board. However, the Sarbanes-Oxley today it is well implemented.

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