Sarbanes-Oxley Article, Essay Example

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Essay

Sarbanes-Oxley Act made key executives of the companies legally responsible for the accuracy of the audited financial reports. It also mandated that only registered accounting firms could audit public companies and auditing firms could not provide other services to the companies. In addition, audit partners had to be rotated at least every five years. The act also required publicly listed companies to evaluate their financial and operating controls and have them tested as well as audited (Anderson).

Sarbanes-Oxley Act has affected organizations in several ways. First of all, it has reduced the number of companies going public so that they can avoid costs for complying with the Act. Sarbanes-Oxley Act has also helped companies improve internal controls and has made it harder for companies to commit acts of fraud or at least hide them. The Act has burdened smaller companies more because the compliance costs are significant as is evident by the case of SureWest Communications that spent $5 million to implement the Act’s requirements but company’s CFO Dan Bessey reveals that compliance costs have gone down since then. But Bessey also admits that compliance with the Act has benefitted the company and improved its financial condition (Anderson).

The Act has also helped companies reduce the instances of restatements which demonstrates that the accuracy of financial statements has improved. Many companies have observed that requirements imposed by the Act have actually improved their businesses and they continue to comply with the Act if they are not legally required to do so. The Act did create confusion in the beginning but the Accounting profession has caught up over time and now compliance is not only quicker but also more cost-efficient.

Reference

Anderson, Mark. Sarbanes-Oxley still raises ire, but it has fans, too. 20 January 2012. 30 September 2012 <http://www.bizjournals.com/sacramento/print-edition/2012/01/20/sarbanes-oxley-raises-ire-but-has-fans.html?page=all>.

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