October 22th 2012
The Sarbanes-Oxley act was created in 202 to help restore the public confidence in the financial markets and integrity as well. There have been quite a few corporate disasters that included including Enron, Worldcom, Adelphia, and Tyco. All four corporate disasters had similar fraudulent behavior. The implementation of effective business ethics became essential and the new law required the publication of corporate codes of ethics. It did not mandate their content. (ORIN, 2008 )
The goal of the law was to stop fraudulent behavior, tighten governance and make it more costly for individuals if they were involved. Its goal was to create an environment that would reduce the incentive for individuals to engage in fraud, with greater oversight, more accountability and meaningful penalties for illegal behavior. (ORIN, 2008 ) Unfortunately, while SOX (The Sarbanes-Oxley act) included a long list of regulations and requirements, it did not stem the tide of significant frauds. Uncontrolled greed and creative financial instruments, with a belief that the only way the economy could go was up, being unrealistic led to another wave to a big fall in our economy.
The revelation of the size of the audit and accounting fees paid to Arthur Andersen by Enron and similar fees paid in other current financial debacles lead to another key requirement of Sarbanes-Oxley: mandatory auditor rotation. But the Sarbanes-Oxley did not go far enough. The law required rotation only of the lead auditor within a firm. (ORIN, 2008 ) This article submits that it should have required rotation of audit firms instead. The positions of the public companies, the American Institute of Certified Public Accountants, the Government Accountability Office, and accounting journals are explored as to the rotation of auditor firms regarding audit-partner rotation within a firm. (ORIN, 2008 )It also concludes that Sarbanes-Oxley should be expanded to require audit-firm rotation.
The writer conducted a survey of thirty-nine randomly selected people about what is publicly available about the codes of ethics and how they used them. The results of this survey indicated satisfactory compliance by the vast majority of these corporations with both the spirit and the letter of section 406. Section 406 is the code of ethics and all of it terms. For example, 92 percent of the corporations in the survey had adopted codes of ethics that not only satisfied the basic elements set by the Sarbanes-Oxley Act, but also reflected that careful thought and attention was consistently paid to the particular ethical conundrums of…