The Scrushy Way Essay

1617 words - 7 pages


Learner: Patrick W. Bass


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The Sarbanes-Oxley Act of 2002 (SOX), named after its primary sponsors in both the US House and Senate, was a bipartisan bill designed to restore investor confidence. The bill was sent by the legislature to the White House and signed by President George W. Bush following the accounting scandals of the early 2000s that brought down some of the largest publicly traded firms. The stated purpose of the law was to “protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes” (Sarbanes-Oxley Act of 2002). The author believes that this law creates unnecessary government intrusion in business and is an impediment to the free market and as such puts many firms, especially smaller ones, at a competitive disadvantage.
Alternatives to SOX: Handling Issues Ethically
Most of the activities regulated by SOX should be handled as ethical issues. It is not necessary to create additional government bureaucracy known as the Public Company Accounting Oversight Board (PCAOB) or to give more power to the Securities and Exchange Commission (SEC) to handle what are essentially corporate governance and ethical decisions. Expanding the role of government in business is never the proper response and is indicative of an automatic response that suggests an ulterior motive. If government desires an unstated end, then those in power may grasp upon a situation, or exacerbate an existing situation, whereby the populace will cry out for resolution. The government will then answer the call for help by imposing increasingly greater restrictions on free trade, movement and liberty itself. The accounting and corporate scandals that predate SOX were used as the impetus to bring forth sweeping legislation that the American public demanded (Canada, Kuhn, & Sutton, 2008, p. 988). The legislation, however, American companies at tremendous economic disadvantage. SOX imposes restrictions that impact profits and has huge cost many times over that which the SEC predicted. The activities that SOX endeavors to control, as with most government intrusions, should be controlled by the application of a proper social-ethical paradigm.
Audit Committee and Auditor independence
SOX mandates, as a matter of public law, that auditors be independent from the firm they are auditing. Public accounting firms have been largely self-regulated and have done a fair job of maintaining a very high ethical standard for Certified Public Accountants (CPAs). Auditor independence is one area were ethics should not be regulated by law, but instead should be a matter of corporate governance. The section of law requiring that CPA firms also not provide consulting services only instigated the spin of many consulting divisions so that the letter of the law could be maintained. Anderson’s consulting firm became Accenture. PriceWaterhouseCooper’s consulting division became PWC Consulting. In a similar fashion, SOX...

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