Corporate America and Sarbanes-Oxley Act: The Costs vs Benefits
|
Code : GOV0018
|
Region : USA |
||||
 |
 |
 |
OR |
||
Excerpts |
|||||
|
Corporate America and the Auditing Industry Traditionally, auditing industry inAmerica has been solely responsible for auditing of company accounts to be perused by shareholders for assessing the financial state of their investments. Till the late 1930s, auditing was voluntary.After the SecuritiesAct of 1934, auditingwasmademandatory, as companies were required to disclose information to the public. The jobwas entrusted to third parties,who were appointed to audit the accounts of public companies. In the late 1980s, the laws that restricted advertising and competitive bidding for accounts by the auditorswere lifted. Subsequently, consolidations in the industry left fewdominant players in the industry (Exhibit I). Since then, auditing industry in US has been dominated by the big five firms namelyAndersen, Deloitte Touche, PriceWaterhouse Coopers, Ernst & Young and KPMG... Sarbanes-Oxley Act On July 30th 2002,GeorgeW.Bush signedSarbanes-OxleyAct of 2002, reinforcing the need for accountability and due diligence in corporate disclosures. Bush announced, “Nomore easymoney for corporate criminals, just hard time. The era of lowstandards and false profits is over”13 , and added, that the long-standing corporate scandals that have resulted in loss of trust on US business systemwould be addressed.14 The law intended to bring in checks and balances in the financial disclosures and corporate governance. Costs vs. Benefits The corporate scandals at Enron andWorldCom, had above all, questioned the premise of corporate governance, which defines the roles of the executives working towards enrichment of shareholder’s wealth. The wave of scandals depicted the incidents of betrayal by the top executives who pocketed huge amounts while leaving the shareholders at losses. American capitalism built on the shareholders’ capital, was losing the trust of the investors. This would in future determine the access to investments in the country, wheremore than half of allAmericans own stock. |
|
| For Case Books
Click Here >> For Case eBooks Click Here >> |
|
Public Company Accounting Oversight Board Public Company Accounting Oversight Board.Moving to a different private sector regulatory structure, a new Public Company Accounting Oversight Board (the Board) will be appointed and overseen by the SEC. The Board,made up of fivefull-timemembers,will oversee and investigate the audits and auditorsof public companies, andsanctionboth firms and individuals for violations of laws, regulations and rules...
