SOX Compliance

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Results of SOX Compliance Surveys
The SOX referring to the Sarbanes-Oxley Act of 2002, was enacted as a federal law in 2002 by Congress to curb massive accounting and corporate frauds that were happening in public companies before the act. Investors from companies that went public received heavy losses resulting from financial statements that were highly inaccurate and deceptive and some of these corporations included WorldCom, Adelphia, Tyco, and Enron (Grant and Vanac, 2005). As a result of shareholders’ losing billions of dollars from such deceptions, the confidence level of investors in the United States financial markets drastically declined. From this, the legislature decided to institutionalize controls in accounting, management, and …show more content…

Going public at this juncture would be detrimental to the company’s financial position as the company would incur large financial burdens required to fund the administrative costs increments after going public. SOX, on one hand, can make listed companies acquire credibility and accountability as it becomes transparent to its shareholders and prevents material misstatements and accounting fraud. Through money raised from investors in order for them to have an equity stake in the company, the investment is used in shareholder value increment through strategic and operational efforts. However, SOX compliance may prevent company managers and employees from concentrating on revenue or business-driven activities, thus the company focuses on short-term goals rather than long-term goals. As mentioned above the large financial cost burdens and compliance regulations can be limiting to smaller and medium-sized companies that lack the resources to fund and execute such compliance measures. For example, Congressman Ron Paul argued that corporations were driven away from the United States simply because the SOX Act provided bureaucratic requirements of compliance making U.S. companies be at a disadvantage competitively. This was evidenced by the delisting of foreign corporations from the stock exchange in the United States (Bergen, 2005; Grant and Vanac,

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