In: Finance
The Sarbanes-Oxley (SOX) Act was enacted in 2002 for companies in the private sector as a result of the Enron and other scandals. However, it does not apply to government. Should SOX-like provisions be required for the federal government? Has there been any move in this direction? Why or why not?
The SOX was primarily enacted following the Enron and other scandals. It basically sought to remove the compliance and audit gaps that may lead to the same kind or scandals in future. This is considering the fact that these scandals lead to losses worth trillion dollars to the investors and the general public and hurts the image of corporates and government identically.
The SOX was encated for US corporations and sought to tighten accounting, financial reporting and audit practices to strengthen the basic foundations that may lead to humongous consequences. However the basic difference was that this act only was implemented to the corporations and management alike. There was no mention of this act being applied to the Federal Govt.
While there may be loopholes in accounting, management and audit compliances in corporations, this act sought to remove those. However loopholes do definitely exist in goverment as well. This has time and again being proved by major government scandals which break out every now and then. It is therefore highly imperative that a SOX-like provision be made for the federal government as well. This can be structured in the following way somewhat:
1. There can be an independent international agency which would
be SOX like which would oversee the compliance part of reporting of
the federal government.
2. Timely audit would be conducted to ensure that there is complete
transperancy in actual and reported numbers.
3. The International agency can have personnel from different
countries who may have no likeliness or favoratism in terms of the
country they may belong to. The agency would just act as an agency
to monitor the works.
4. All the necessary laws and provisions can be framed by taking
consent of all the countries in totality.
5. All the proceeding so this inernational agency can be made
public so that there is complete transperancy in its own working as
well. Just that there may be some restriction on sharing of
sensitive country related information in the public domain.
6. It is highly imperative that the agency works as independent not
affiliated to any particular member country
Thus this is a basic structure of how the provisions should work
out for the SOX-like functions for the federal government.
There has not been any move in the direction. This can be
attributed to the fact that moral policing of a country's
government can basically unveil things and leak them. This may not
be in the national interest of the country at large. There can be
financial ramifications and global ramifications given the
sensitivity and diplomacy with which countries deal with today. A
single act can lead to uncovering of a lot of things that can
potentially expose the entire economy to the world and may lead to
dire consequences. Also after globalization this thing has become
more important. There is a sort of ripple effect that happens
globally. We can view the same with a simple example of stock
market movements. Thus whether or not this SOX-like provisions
should be there for the Federal Govt is something that can be
debated and should be by the highly qualified minds and a decision
be reached at the highest level. This can be done after considering
all the alternatives and consequences and should be agreed upon
globally.