Question

Let's begin by doing some research on Sarbanes-Oxley, a regulation designed to prevent accounting fraud. In this discussion explain if you think Sarbanes-Oxley is adequate to prevent fraud. Use examples and cite fact to support your opinion and cite your resource at the end of your original post in good APA format.

Answer 1

As mean of dealing with the accounting frauds Sarbanes Oxley Act was introduced in the US and enacted in July, 2002. The act contains 11 sections directed to reduce the corporate accounting frauds. Major elements of the act includes the following:

1. Formation of Public Company Accounting Oversight Board (PCAOB).
2. Independence of auditors.
3. Acknowledgement of corporate responsibility.
4. Enhanced the financial disclosures in financial statements.
5. Dealing with conflict of interests.
6. Reports (Chhaochharia, Grinstein, Grullon & Michaely 2016)

It is important to mention here that no act is enough until unless the human agency implements the sections of an act effectively. Similarly, if the provisions of Sarbanes Oxley act are properly implemented and followed by an organization than the act is certainly adequate to prevent fraud (Banerjee, Humphery-Jenner & Nanda2015).

It is important to note that since the enactment of Sarbanes Oxley act the number corporate accounting frauds have certainly reduced. This clearly shows that the act has significant influence on reducing the accounting and corporate frauds (Banerjee et. al. 2015).

References:

Banerjee, S., Humphery-Jenner, M., & Nanda, V. (2015). Restraining overconfident CEOs through improved governance: Evidence from the Sarbanes-Oxley Act. The Review of Financial Studies, 28(10), 2812-2858.

Chhaochharia, V., Grinstein, Y., Grullon, G., & Michaely, R. (2016). Product market competition and internal governance: Evidence from the Sarbanes–Oxley Act. Management science, 63(5), 1405-1424.