A Case Study of Sarbanes-Oxley Act Compliance
Date Issued
2004
Date
2004
Author(s)
TANG, CHIN-HENG
DOI
en-US
Abstract
The recent stock market plunge and the ongoing revelations by major U.S. corporations such as Enron, Tyco, WorldCom, Adelphia and others of substantial accounting and operating irregularities gave rise to the most sweeping securities law changes in decades of the United States, the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 (the Act) was enacted on July 30, 2002, largely in response to a number of major corporate and accounting scandals involving the above some of the most prominent companies in the United States. These scandals have resulted in a great loss of public trust in corporate accounting and reporting practices. CEOs and CFOs of public companies must firmly grasp the degree and significance of distrust that now exists.
The thesis first summarize thousands of pages of the Act and the resulting new SEC rules and interpretive commentary along with the new listing standards regarding the corporate governance rules promulgated by the market rulers. It will also provide a foundation for understanding the new responsibilities for corporate governance, management reporting, financial statement disclosures, management assessment of internal controls, and the changed responsibilities of auditors. Further, the thesis will then focus on the compliance implementation and its impact, challenge and possible solutions to achieve the corporate governance requirements. As far as the research methodology is concerned, a case study of a NASDAQ company would be applied.
Result shows that the Act did have huge impact to each participant within the corporate financial reporting supply chain especially to the board of directors, management and internal and external auditors. Each of their roles had been repositioned and redefined to reflect their new responsibilities under the new corporate governance environment. Result also shows that Sarbanes-Oxley did require lots of new actions for the public companies to achieve the objectives but it did not change the nature of the corporate financial reporting as well as the management’s responsibility. Public companies now have the chance to revaluate themselves through the statutory requirements. And, the Act not only provide the opportunity but also a challenge to the management of the Company as well as its audit committee, auditors and board of directors to work more closely together than ever to provide assurance on its financial reporting process and information shared with the investors
Management of the public companies should discuss with their independent directors board, external auditor and attorney in details regarding the new requirements derived from the Sarbanes-Oxley and related regulations. They should ask their securities lawyer to explain all significant Sarbanes-Oxley sections as well as the rules of SEC and Markets through face to face meetings and make sure each participant fully understand their new character and responsibility during the post Sarbanes-Oxley era. This is essential factor to achieve the goal of compliance of the law and to establish a quality corporate financial reporting.
Subjects
公司治理
財務報導
Corporate governance
Sarbanes-Oxely Act
Type
other
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