The Sarbanes Oxley
The Sarbanes Oxley (SOX) Act of 2002 was passed after events of fraud of Evron, WorldCom, and Tyco. The intention of passing the law was to restore the confidence of investors by limiting the chances of public companies of defrauding investors. Section 406 of the Act required public companies to have stated codes of ethics that govern and tame company principals, financial and accounting officers. Statistics have shown that companies with adopted codes of ethics which control the senior principals in the company experienced reduced cases of financial mismanagement over the last decade. The declining cases of financial misconducts is a clear indication that Sarbanes Oxley 406 financial code ethics have been effective in controlling money laundering and defrauding of financial investors in the stocks market but the effect is negligible.
However, the results expected were onsignificant as compared to the expectations of the public. From the study, it was evident that from the companies studied, only ten more companies had implemented the requirements since the last study. It means that the law is useful but only if companies abide by it and establish the specific code of ethics for the senior financial officers. Otherwise, of companies would avoid creating the laws and money laundering would continue and thus render the law useless.
In my opinion, I would recommend that the government follows up on the companies and ensure that all the companies meet the requirements of the law. Since the law has proven to be effective in the few companies that have ethical standards for the financial seniors, what remains is ensuring that all companies have the measures in place. Failure to follow up on the establishment of the ethics of a companies’ management will make the law seem like a requirement for detailed documentation and not a demand for fraud detection and prevention.
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