Week 3 Coursework Example | Topics and Well Written Essays - 1250 words

Week 3 - Coursework Example The Act also has a crucial provision, Â §404 which requires companies to evaluate their internal financial-reporting controls on an annual basis. While the intention of this legislation is clear, the outcome is still debatable in terms of the benefits it brings to the company and the economy as compared to the costs. Some of the provisions that bring this debate include those that cover issues related to insider trading, auditor independence, internal controls, corporate responsibilities, and internal controls. After the collapse of Enron and WorldCom that left shockwaves throughout the corporate world and left investors in the biggest accounting scandal in history, the Sarbanes-Oxley Act (SOX) was enforced. This act has become the most significant legislation that embraces corporate governance in the United States since the securities laws of the 1930s. SOX has resulted in a number of changes in the regulatory environment and governance in the United States, including requiring separate analysts of the financial statements from underwriters, requiring senior management to certify their company’s quarterly financial statements, heightened disclosure, and requiring attorneys to report fraud or crimes when detected without delay. While the intention of SOX is clear, there has been a debate about its effects. Proponents of this legislation maintain the fact that it helps investors be more confident in the safety of their investments because it has helped in improving the accuracy of th e financial reports and transparency. On the other hand, opponents argue that compliance to this Act results in a greater burden to public firms, especially those which are small because of increased average costs as a result of the new regulations. Studies show that SOX has resulted in a dramatic increase in companies’ compliance costs. Even though this cost has now reduced as