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Acc 291 Final Paper Ethics

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Effect of Unethical Behavior Article Analysis
Christian Tribble
Accounting 291
May 18, 2012
Don Gross

Effect of Unethical Behavior Article Analysis
The Sarbanes-Oxley Act, passed by U.S. Congress in 2002, was intended to protect investors from the possibility of fraudulent accounting activities by corporations. The Sarbanes-Oxley Act (SOX) mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. SOX was enacted in response to the accounting scandals in the early 2000s. Scandals such as Enron, Tyco, and WorldCom shook investor confidence in financial statements and required an overhaul of regulatory standards.  

Whether or not Sarbanes-Oxley has given shareholders a better reading of a company’s financial health is yet to be seen. In the near future, we might see benefits in the form of more tightly managed, more transparent companies. We might see fewer bankruptcies, fewer scandals, and fewer people hurt. But today, we know that even if Sarbanes-Oxley’s intentions are good, its costs are bad. Its diversion of attention from business operations, and an army of empowered government regulators, is bad for commerce and free markets. “The Sarbanes-Oxley Act of 2002 was intended to improve corporate governance and increase the transparency of financial audits. The legislation also could have significant effects on the public accounting industry. This study finds evidence of higher audit fees across all firms resulting from compliance with the law. However, after accounting for self-selection of auditors, we do not find evidence that the size of the audit firm affects the magnitude of the audit fee increase” (Sarah Cosgrove, 2006). Many people supported Sarbanes-Oxley because they felt it was important to take whatever steps were necessary to restore investor confidence. Now that the act has been implemented, some groups have talked about returning to Capitol Hill to try to reopen Sarbanes-Oxley and repeal some...

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