Sox and Its Effect on the American Enconomy

Billy VanTreuren
Dr. Miller
Business Communications
12 April 2010
Sarbanes-Oxley and Its Effect On American Businesses
In a world full of scandals and immoral acts, there was a need for change in the actions of businesses in terms of honesty and ethics. On July 20, 2002, the Sarbanes-Oxley Act was implemented to try to prevent future scandals from occurring. U.S. Senator Paul Sarbanes (D-Maryland) and U.S. Representative Michael G. Oxley (R-Ohio) constructed the act after realizing how companies were dishonestly conducting their businesses (Bainbridge 1-3). Many businesses were following the rules as expected, but corporations such as Enron and Tyco were involved with large scandals that ultimately cost shareholders billions of dollars. This new act placed regulations on businesses in terms of how they record their financial information, what kind of internal controls they use, and how they disclose financial information to the public. The Sarbanes-Oxley Act has demonstrated many positive effects on the American economy providing its ability to restore confidence among investors and create a more ethical and fair environment within the workplace.
The Sarbanes-Oxley Act passed almost unanimously in the House and Senate. Within the act there are eleven sections or “titles,” stressing corporate compliance with governance and financial practice (SOX Summary). Section 401 of the Act states that “financial statements published by issuers are required to be accurate and presented in a manner that does not contain incorrect statements…” (SOX Summary). In addition to these financial statements, issuers are to include all balance sheets. Section 409 deals with the issue of disclosing false or incomplete information to the public. It states “Issuers are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. These disclosures are to be presented in terms that are easy to understand supported...