Has SOX had its intended effect? 2179

  • Hi all, I am a senior accounting student, working on a term paper of my choice and I chose SOX. I was hoping to focus on the heavy-handedness of the Act (i.e. too much regulation), but have only been able to find concerns with the cost for small companies.
    Can any of you help, either by recommending gov’t sites with comments on this subject, or any of your own thoughts about the strict regulations of SOX, its effects on U.S. competition, unintended consequences, etc ?
    I’m also looking for books on the subject or magazine articles.
    Thanks so much for any help.

  • Hi Katherine and welcome to the forums 🙂
    As a starting point, I’d suggest searching these forums using the keywords ‘benefits’ and ‘Enron’
    We’ve had lots of sharing both pro and con as to whether SOX was worth it all. While I feel there are benefits, the overall costs and added overhead for many companies offset this somewhat (esp. the misinterpretations and misapplications due to the vagueness of these statutory reguirements). Thus, you’ll see a wide range of opinions, so there are no wrong answers on this 😉
    Below are my own perceptions:
    How SOX may be meeting original goals

    • Established personal accountability of senior management so that the chances for Enron-like scandals are minimized (SOX 302)
    • While the general public may not understand SOX well, I think it has still improved stockholder perceptions of the equity markets (e.g., fraud will be dealt with severely)
    • Improved financial controls and standards are required in all companies (e.g., better checks-and-balances, autonomy controls, separation-of-duties, etc)
    • Improved IT security as firms follow COBIT and other IT based guidelines (SOX 404)
    • Better quality for financial information can provide an intangible benefit in improved decision making
      Issues and Areas where SOX may have not met original goals
    • Vague nature of laws (esp SOX 404) have led to misapplications (e.g., folks implementing controls in the ‘name of SOX’ that weren’t truly SOX requirements)
    • Increased Expenses are certainly a factor that takes some of benefits away. In some cases, SOX ‘dropped right in’ due to outstanding control systems already in place in a well-run company. Still, most firms have experienced a ‘doubling’ of audit fees alone due to the need to independently assess SOX implementations by a neutral entity. Also, there are certainly increased costs due to documentation, controls testing, additional overhead, 7 year retention periods, etc. Increased costs impact profits and also directly affect the shareholders of companies (based on stock earnings)

  • [hi Kateyes. i am also doing research on sox as well for my research paper. Conatct me if you would like so we could cross reference our info.

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