Sarbanes-Oxley Act Essay Example | Topics and Well Written Essays - 1000 words

Sarbanes-Oxley Act - Essay Example Sarbanes-Oxley Act The Sarbanes-Oxley Act is deemed to be quite effective in protecting the investors and enhancing the factor of accurateness and reliability in various corporate financial activities. It has further been noted that the act mainly aims at enhancing the above mentioned aspects in a constant basis with the implementation of strict laws and rules for audit committees of public companies, binding accounting professionals’ functions under the stated regimes (Rolf, 2005). Effectiveness of Sarbanes-Oxley Act in Minimizing Corporate Fraud and Protecting Investors The Sarbanes-Oxley Act, with its strict supervision encourages companies to adopt stern control system on their operational activities, which are expected to minimise the crime rates relating to investor fraud within the organisation. The effectiveness of the Sarbanes-Oxley Act can be exemplified from the fact that it has been able to develop various new legal enforcements with regard to deal with corporate f raud and ensure punitive measures for the wrongdoers within any business. Additionally, the effectiveness of the act can also be justified from the fact that it not only punishes the companies that are involved in fraud but also the participants who initiates the same and therefore, assists in maintaining an all-inclusive framework to prevent accounting fallacies (Rolf, 2005; Ernst & Young, n.d.). Suggestions for Improvement. The act aims to take continuous plunges in developing its strategies and creating provisions that can restrain companies and accounting professionals from conducting corporate fraud, taking its learning outcomes from the classic disaster case of Enron scandal. However, like any other act or legal provision, Sarbanes-Oxley Act also has the scope for further improvement, so that it can enhance its effectiveness to the next level. Suggestively, the act needs to include certain penalties that would be efficient to target low level frauds. Currently, the charged pen alty structure of the act can be regarded as quite severe for any kind of fraud in the context of corporate governance. Impact of the Formation of PCAOB on Auditing Firms and the Public Accounting Professions It is apparent from the above discussion that Sarbanes-Oxley Act is quite effective in dealing with the increasing cases related to corporate fraud. In strengthening its position as an effective legal provision aimed towards reducing corporate frauds, the Sarbanes-Oxley Act as used to form the Public Company Accounting Oversight Board (PCAOB). The PCAOB is a non-profit organisation that deals with protecting the interests of the investors by promoting the accuracy in accounting reports as well as emphasising independence of professionals in developing audit reports. Apparently, aimed towards binding accounting professionals, the initiation of this regime has imposed certain impacts on auditing firms and the public accounting professions, the most affected aspect being auditor i ndependence. In the aftermath its enactment, the staff of PCAOB are in constant supervision of auditing firms and the public accounting professionals likewise, in order to identify any kind of violation of applied laws and professional standards in developing financial reports. In this regard, some of the rights of the authority include their power to impose