The Sarbanes-Oxley Act Of 2002

History

“In July 2002, in the U.S., Sarbanes-Oxley, officially titled the Public Company Accounting Reform and Investor Protection Act of 2002, commonly referred to as SOX was signed into law. It is named after sponsors Senator Paul Sarbanes (D-MD) and Representative Michael G. Oxley (ROH). SOX is aimed at protecting investors, and restoring investor confidence, by improving the accuracy and reliability of corporate disclosures. The act covers issues such as establishing a public company accounting oversight board, auditor independence, corporate responsibility and enhanced financial disclosure.”(R. Power, D. Forte, 2007)

Benefits

Because the SOX Act was designed to protect investors, compliance with the act can lead to shareholder confidence which can strengthen the outlook for a company and increase its stock price. Companies auditing their businesses often find ways to eliminate waste and increase efficiency вЂ" both of these reduce cost and therefore have a direct effect on the bottom line. Furthermore, SOX provides investors with more accurate and in-depth tools for valuing a company which promotes legitimate growth of businesses and the economy.

Costs

Compliance with SOX can be costly for companies to put in place and adhere to as a large amount of time and money must be spent on instituting documentation, oversight via segregation of duties and authorization, archiving and auditing to ensure all policies are in place. The time and money needed to understand the requirements and the measures needed to be in compliance. Also, “Costs associated with SarbanesвЂ"Oxley have beÐ'­come a major disincentive to companies listing on American stock exchanges to the point that London or another city could replace New York as the world's