The Sarbanes-Oxley Act of 2002

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A series of highly publicized accounting scandals, such as those involving Enron and WorldCom, generated such a fierce backlash that Congress felt compelled to draft legislation to prevent such scandals from recurring. This legislation is now known as the Sarbanes-Oxley Act of 2002 or the Public Company Accounting Reform and Investor Protection Act of 2002 (hereinafter referred to as the "Act").


Some scholars have argued that this legislative framework is too intrusive, that corporate fraud ought to be managed through market mechanisms rather than intrusive governmental agencies, and that the Act is more political than helpful (Ribstein, 2005). Other scholars concede the intrusive effects of the Act, but argue instead that the main policy objectives, such as curtailing corporate fraud and improving transparency, are enhanced by the Act (Cunningham, 2003). This essay will argue that, given the nature and the scale of the scandals that have occurred in the absence of such legislation, corporations ought to be compelled to comply with the Act; in order to more fully develop this thesis, this essay will present the type of abuse which led to the legislation, an overview of the main provisions of the Act, and an analysis of the conflicting opinions regarding the efficacy of the Act.
In the Enron case, a major employer that was deemed financially stable and a model of sound business practices collapsed suddenly and dramatically. This was a company with billions in annual revenues, well-respected by a broad spectrum of the public, and politically well-connected. ...
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