Sarbanes-Oxley Act

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Effectiveness of Sarbanes Oxley Act - Minimizing Corporate Fraud & Protecting Investors

Sarbanes Oxley Act is a federal law imposed in order to achieve the accounting and financial transparency in the overall working systems. In order to understand the level of effectiveness that the Sarbanes Oxley Act presents, it is essential to first grasp the basic contextual ideology of the system. The law was reformed in 2002 by the United States federal government in order to protect the corporate disclosure of minimizing the level of risk and protecting the investors. The effectiveness that the law brought towards the accounting and financial system of the corporate world is that it helped to prevent insider deals and trading through implementation of severe rules for audits as well as for the auditors in relation with companies traded publicly. Moreover, the law brought effectiveness in the overall system through promoting companies to adopt stringent internal controls, and mounting the consequences for white-collar offenses relating to investors deceptions (Wright, 2004, pp. 325). In addition, the effects that the law represented are that it helped gain and reestablished the confidence in investors safeguarding them with integrity of disclosures, clarity in the accounting and financial modes across the corporate structures(Wright, 2004, pp. 325).

The improvement in regards to the effectiveness of the Sarbanes-Oxley Act is that the regulatory Act seizes several significant steps in the direction of improving disclosure, hence improving the contextual framework of reporting of the accounting and financial processes (Wright, 2004, pp. 325). The interpretive suggestions in improving the regulations of the Act would include installations of checks and protocols, increasing speculations transactions, correlation of inflow and outflow of money and finally regulation could always look to improve the quality assurance and quality measures of the overall system, which have an endless scope.

Impact of the Sarbanes Oxley Act on Auditing Firms and Public Accounting Professions

The Sarbanes Oxley Act was established due to the accounting scandals related to the giant public corporations in which the auditors and accounting professionals faced pressures due to the profound questionable accounting process of that period. However, the supervision and the development of the regulatory Act brought many changes to the auditing system and professionals in that regard. For instance, prior to the establishment of the PCAOB, the auditors for the companies trading publicly were obliged to overlook by their authorities in practice and to review literature brought forth in other firms in the auditing industry (Ashton, 1990, pp. 148). According to the Title 1 of the Sarbanes-Oxley Act, it substantially transformed the area and facility in which these publicly limited company auditors were otherwise operating on behalf of all the accounts and the respective transactions that was performed for its maintenance and control by the PCAOB. Moreover, the major impact of the Sarbanes Oxley Act on the auditing firms and public accounting professions came from the functions that were implemented in regards to establish a strength full controls on the systems and associated players (Ashton, 1990, ...