The Sarbanes-Oxley Act

[Name of the InstitutionThe Sarbanes-Oxley Act

Introduction

The Sarbanes-Oxley Act is one of the many federal laws of the United States of America. The law was enacted in response to much accounting and corporate scandals that the United States saw. These frauds included the ones which affected WorldCom and Enron, involving large scale frauds within the organizations. These frauds damaged and lifted off the confidence of people in the financial markets of the United States. A number of factors created the culture and conditions which enhanced the fraudulent activities. These activities remained undetected for many years. These and many other conditions required the Federal Government of United States to make a law which to analyze and understand the contentious and complex roots of the problems which contributed to such fraudulent activities (Anand 2006). The Sarbanes-Oxley Act was formed to counter such problems and the fraudulent activities. The law made numerous reforms in the corporate law of the United States of America and was hauled by almost all the business sectors. This paper will look into the history of the Sarbanes-Oxley Act of 2002. It will also throw light into the implementation of the Act and its impact on businesses in particular and society in general. The paper will also conduct a Policy Analysis of the Sarbanes-Oxley Act of 2002. And lastly, the paper will include a conclusion which will summarize all the important points discussed in the paper.

History of the Act - Why was the Law Necessary

There was a list of enormous business frauds which took place in the US from the year 200 to 2002 (Piotroski, Joseph,Srinivasan 2008). This series of accounting scandals made their way to the headlines and grabbed the attention of the public of America. A large number of executives, as well as, companies were charged and convicted of either overstating revenues of the firms or misusing the corporate funds (Shakespeare 2008). All of these illicit activities occurred due to the illegal accounting actions and activities that these firms were involved in. There were a number of factors which contributed to the culture and conditions which led to these fraudulent activities. The highly publicized and spectacular frauds at Tyco, WorldCom and Enron exposed a large number of significant problems with incentive compensation practices and conflicts of interest in the corporate world of the United States of America. A large number of meetings and hearings were conducted by the Senate Banking Committee, on the problems in the market which caused the financial market of the United States of America lose trillions of dollars worth of market value. In a period of six weeks, ten meetings were scheduled. During the meetings, some of the best people of corporate law and corporate world were asked to come, attend and testify the problems that the corporate world was facing which led to the fraudulent activities. These people identified a number of problems, factors and their effect on the activities of the people of the corporate world. The hearings resulted ...