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To live up to this, the Sarbanes-Oxley Act of 2002 was passed by the US government. The Act was aimed at monitoring the financial and accounting standards of publicly held…
SOX ensure accurate financial statements by eliminating unethical acts in organizations hence increasing the public’s confidence in investment. Therefore, employees are required to report any wrongdoing for the organization to be punished by the federal government. The enforcement of the Act actually resulted to decline in financial scandals. However, 2008 financial crisis proved that any regulation is unable to reduce or control risks. Additionally, due to the cunning nature of organizations, the Act has been greatly challenged. A good number of companies have refused to go public in order, not to comply with the SOX Act.
SOX are not necessary for companies because it just limits flexibility of financial management despite the stiff global competition. It also raises costs to organizations in the form of monetary expenses associated with SOX compliance. Since companies are more concerned with public image, they need no strict regulation for them to act ethically. They often have internal controls necessary to maintain the required ethical ...
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