You likely have read about the Sarbanes-Oxley Act. Why do you suppose Congress p

Question

You likely have read about the Sarbanes-Oxley Act.  Why do you suppose Congress passed this law?  In your opinion, is the law providing any benefit for the average investor?  Do you think if we have enough such laws, it will eventually be impossible to commit corporate fraud or similar activities?

You likely have read about the Sarbanes-Oxley Act.  Why do you suppose Congress passed this law?  In your opinion, is the law providing any benefit for the average investor?  Do you think if we have enough such laws, it will eventually be impossible to commit corporate fraud or similar activities?

Explanation / Answer

Sarbanes Oxley act is a United States federal law that set new or enhanced standards for all U.S. public companyboards, management and public accounting firms.

The bill, which contains eleven sections, was enacted as a reaction to a number of major corporate and accounting scandals, including Enron, and Worldcom. The sections of the bill cover responsibilities of a public corporation's board of directors, adds criminal penalties for certain misconduct, and required the Securities and Exchange Commission to create regulations to define how public corporations are to comply with the law.

In my opinion , the law is providing benefit for the average investor as can be see from examples like Enron & Worldcom which are big names in the corporate world. The fact that big corporations cannot escape scrutiny and are punished for fradulent actvities restores the faith in sarbanes Oxley act.

It is difficult to say that having a law will make it impossible for corporations to commit corporate fraud because they may still find a loophole in the existing law to commit fradulent activities in a different way. The investors need to be vigilant before investing and laws have to be continuously amended to ensure the loose ends are tied and there is little or no scope for fradulent activities.

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