Assess the Effectiveness of SOX Legislation Research (Essay Sample)

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Assess the Effectiveness of SOX Legislation
Question 1
According to Garber and Sox, the enactment of SOX comprises two important ethical components that have the ability to act as prevention to unethical organizational practices (1806). The first component implies that a code of ethicsshould be set up for senior financial officers in an association, while the second component entails that all the time outside lead auditors within a firm ought to be rotated. In the first component, it should have implications on social responsibility with regards to mandatory publication of ethics codes as indicated in the SOX legislation.
The article “Audit Committee Composition and Effectiveness” by Malik suggests that the second component did not reach out sufficiently far and that there ought to be a necessity for the rotation of review firms rather than just lead auditors (67). This review rotation prerequisite was implemented to ensure that outside auditors are autonomous and impartial of the organizations that they are auditing and, as indicated by the article, the legislature should oppose industry weight with respect to these arrangements. In addition, it was implemented to ensure that they ought to conceivably be extended. In addition, according to SOX legislation, it has suggestions on social obligation with respect to required distribution of morals codes.
Question 2
As indicated by Sox, financial fraud and abuse are still being experienced despite the passage of SOX because there are still complexity on the accounting fraud such as that experienced at Enron which is typically hard for the average normal retail investor to find out (203). According to Selby, the Ivy League holding Wall Street Analyst did not exposed the Enron fraud, but the exposure was done by the journalist who utilized diary articles and open filings in their due diligence procedures (98). Regardless of entry of SOX, the statement of financial fraud remains excessively basic occurrence, regularly affect the retirement of individuals as well as instructive investment resources. Engaging (SOX) first on the scene to reveal a fake organization can be extremely lucrative from a short merchant's viewpoint and can be rather gainful to a distrustful financial investor who is weighing the general market conclusion.
Question 3
Based on my research, one recommendation for enhancing SOX is to avoid conflicts of interest. As to my understanding, SOX has provided counseling services and this is the correct step for the goodcourse since Andersen was achieving more income from counseling as compared to that from administrations. However, some other conflict of interest may arise; for example, there is an issue with the recently made Public Company Accounting Oversight Board (PCAOB).
According to Garber andSox, the board individuals are not designated by the President and the SEC does the contracting and terminating (1811). This perhaps abuses the regulation of detachment of forces. In any case, the PCAOB will be the government arm; at that point, it will be good if the president chose the individuals from the board.
The second way of improving the SOX legislation is to take into consideration the five-year rotation of the auditors. As of now, SOX is in need of the audit rotation partners; however,they can still all be from a similar firm. Therefore, a superior method for rotation is to achieve the rotation for the entire firm
Question 4
Beyond the scope of SOX, the organization ought to have legitimate plans set up so as to diminish fraudulent exercises from happening. Allowing employees to be aware on the company policy is among the best method to prevent behaviors caused by fraudulent activities. ...