The Sarabanes Oxley Act was initiated in 2002. Most say it was response to the fraud involved with the Enron scandal. Regardless, it is to be followed by all public companies. The Act has 11 Titles.
I. Public Company Accounting Oversight Board
II. Auditor Independence
III. Corporate Responsibility
IV. Enhanced Financial Disclosures
V. Analyst Conflicts of Interest
VI. Commission Resources and Authority
VII. Studies and Reports
VIII. Corporate and Criminal Fraud Accountability
IX. White Collar Crime Penalty Enhancement
X. Corporate Tax Returns
XI. Corporate Fraud Accountability
To me, the most important part of the SOX Act is title V. This ensures that the auditors must not be connected to the organization and completely impartial. This is an attempt to bring legitimacy to the auditing process. Unfortunately this has brought up additional costs to companies. Each title adds significant costs to each companies' responsibility in order to comply with the SOX Act.
Good for us, as investors, but does it only hurt the companies that were conducting ethical and trustworthy business?
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