Monitoring the Financial and Accounting Standards - Essay Example

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The paper "Monitoring the Financial and Accounting Standards" describes that public sector organizations are often required to be accountable for the way they manage their finances. To live up to this, the Sarbanes-Oxley Act of 2002 was passed by the US government. …

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Monitoring the Financial and Accounting Standards

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Subject: Human Resources
Type: Essay
Level: Undergraduate
Pages: 1 (250 words)
Downloads: 2
Author: imogene73

Extract of sample "Monitoring the Financial and Accounting Standards"

The Act was aimed at monitoring the financial and accounting standards of publicly held companies thus protecting them from financial scandals like in the case of WorldCom and Enron. SOX was mainly enacted to protect the shareholders as well as the general public from fraudulent practices of companies by ensuring that there are checks and balances in public companies so that they can offer accurate financial statements that are often monitored by external and internal auditors to ensure accountability.

However, the 2008 financial crisis proved that any regulation is unable to reduce or control risks. Additionally, due to the cunning nature of organizations, the Act has been greatly challenged. A good number of companies have refused to go public in order, not to comply with the SOX Act.

SOX is not necessary for companies because it just limits the flexibility of financial management despite the stiff global competition. It also raises costs to organizations in the form of monetary expenses associated with SOX compliance. Since companies are more concerned with public image, they need no strict regulation for them to act ethically. They often have internal controls necessary to maintain the required ethical standards.

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