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The Sarbanes-Oxley Act and Its Implications

The Sarbanes–Oxley Act, also known as SOX, is, perhaps, one of the most famous statewide standards for public organizations in general and public accounting companies in particular. Presupposing that the accounting process should be supervised more closely, the law presupposes that closer supervision of the accounting processes within a company should be carried out to avoid the possibility of fraud (Williams, Haka, Bettner, and Carcello “Statement of Cash Flows” 402).

The enactment of the SOX was far from sporadic – the law was passed as a result of several major court cases concerning financial fraud. Traditionally, the infamous cases of Enron, Tyco, and World.com, as well as the Internet bubble case, are mentioned as the key cases that determined the creation of the act (Williams et al. “Statement of Cash Flows” 411). Seeing that the specified cases could be described as rather elaborate fraudulences, it was obvious that stringent measures should be taken to prevent financial fraud in the future. As a result, SOX is characterized by a very stringent set of principles, which promote complete transparency of accounting processes within a company.

The efficacy of the reform can be viewed as the effect of taking the careful and elaborate steps that define the Sarbanes–Oxley Act. Among the key stages of the action implementation, the following steps must be listed: designing a corporate code of conduct, which the staff must comply with when carrying out the tasks related to accounting; introducing the so-called “non-relational” policy within the workplace so that no whistle-blowing could occur; create a hotline for corporate compliance and assign the person that will supervise the hotline communication process; keep a record of every single member of the staff, their performance and their compliance with the ethical principles, which the organization is guided by (Williams et al. “Statement of Cash Flows” 412). Rather basic, these rules still contribute to the financial safety of an organization.

While the aforementioned steps may seem somewhat excessive as a tool for promoting accountability and financial security within an organization, it seems that they create the environment, in which accountability and professional responsibility may exist and, therefore, the application of SOX is justified. One might argue that SOX itself does not lead to the creation of corporate ethics; instead, the already existing code of ethics must be enhanced with the help of SOX. True, without a proper set of ethical principles for the staff members to comply with, enhancing the security system does not seem an adequate solution (Williams et al. “Statement of Cash Flows” 413).

Nevertheless, SOX can – and, in fact, it should – be viewed as a means to control the accounting process within a healthy work environment with a strong set of ethical principles and high rates of corporate responsibility (Williams et al. “Plant and Intangible Assets” 398).

On the one hand, SOX will not help address financial issues within a company, in which the staff members already are corrupt; on the other hand, the above-mentioned regulation may enhance the corporate code of ethics within a company guided by a set of strong ethical principles. Therefore, the efficacy of the SOX depends greatly on the environment, to which it is applied. Poor accounting control may affect the staff, who are responsible for the purchases and the delivery of raw material; hence, it is imperative that the accounting processes must be supervised closely.

Works Cited

Williams, Jan, Sue Haka, Mark Bettner and Joseph Carcello. “Plant and Intangible Assets.” Financial and Managerial Accounting – With Access Code. 17th ed. New York, NY: McGraw-Hill Irwin. 2014. Print.

“Statement of Cash Flows.” Financial and Managerial Accounting – With Access Code. 17th ed. New York, NY: McGraw-Hill Irwin. 2014. Print.

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OctoStudy. (2022, March 23). The Sarbanes-Oxley Act and Its Implications. Retrieved from https://octostudy.com/the-sarbanes-oxley-act-and-its-implications/

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OctoStudy. (2022, March 23). The Sarbanes-Oxley Act and Its Implications. https://octostudy.com/the-sarbanes-oxley-act-and-its-implications/

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"The Sarbanes-Oxley Act and Its Implications." OctoStudy, 23 Mar. 2022, octostudy.com/the-sarbanes-oxley-act-and-its-implications/.

1. OctoStudy. "The Sarbanes-Oxley Act and Its Implications." March 23, 2022. https://octostudy.com/the-sarbanes-oxley-act-and-its-implications/.


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OctoStudy. "The Sarbanes-Oxley Act and Its Implications." March 23, 2022. https://octostudy.com/the-sarbanes-oxley-act-and-its-implications/.

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OctoStudy. 2022. "The Sarbanes-Oxley Act and Its Implications." March 23, 2022. https://octostudy.com/the-sarbanes-oxley-act-and-its-implications/.

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OctoStudy. (2022) 'The Sarbanes-Oxley Act and Its Implications'. 23 March.

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