The Effectiveness of Sarbanes-Oxley Act

Strayer University

The effectiveness of the Sarbanes-Oxley (SOX) act can be understood by the impact it has had over the improvement and accountability of public company financial reports; as well as culture and ethics of corporations and CPA firms.

While accounting experts and market agents debate the effectiveness of SOX, evidence suggests it's been effective to minimize corporate fraud and protected investors (CAQ - Center for Audit Quality, 2013). The SEC Year-by-Year enforcement statistics show that in 2012, financial fraud reached the lowest level over the past 10 years (SEC, 2013).

The concept of moral hazard is important to situate the SOX act in the context of it's inception (Milgron & John, 1992, p. 129). Self-interested...