Sarbanes Oxley Act - Essay Example

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The Sarbanes Oxley Act of 2002 or SOX may have been promulgated for large, publicly – listed companies but there is no denying that it also has an impact on small businesses and even nonprofit entities as well. As these entities operate within a community and a business…
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Sarbanes Oxley Act
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Download file to see previous pages porting, whistleblower policy, internal policies on executive loans and compensation and external auditor independence can have a positive impact on the nonprofit entity as it contrives to preserve and, even, enhance the trust and confidence the public and its community have on its nonprofit activities.
Small businesses, on the other hand, have pointed out the prohibitive costs of implementing the SOX requirements and that the benefits derived from implementing these requirements are much less than these costs. However, there is also positive impact of SOX requirements on small businesses. Small business owners who adopt the SOX requirements may find their competitive advantage increasing, easier access to new capital or loans, more efficient handling of family-related governance issues and an increased opportunity to deter, discover and deal with fraud.
With the various accounting and corporate scandals that surprised and shocked the whole business world, the regulators, the stakeholders and the private sector, in general, are all clamoring for more transparency and accountability, as well as a more ethical way of conducting businesses, for the various entities. The passing of the Sarbanes Oxley Act is viewed as an important step towards the improvement of these aspects. The SOX is geared towards the publicly-listed, oftentimes large, companies due to their large impact on the economy (in general) and their stakeholders (in particular). However, it is also worthwhile to note that, according to Cynthia Reaves (n.d.), a practitioner in the areas of tax-exempt organization law, the “inappropriate financial management practices” that were present in most of the companies embroiled in these scandals may also occur in nonprofit entities. McGladrey & Pullen, Certified Public Accountants (n.d.) also pointed out that nonprofit entities “interact with or impact a significant portion of the population”. Based on these, it can be inferred that the SOX also has an ...Download file to see next pagesRead More
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