ACC618 Week 6 Discussion 1 Forbes Video

These are the three most important things I learned from the video:

·         Firstly, the complexity of the Act and the associated costs make it difficult to be SOX compliant, which has a direct impact on conducting business in the United States. The preliminary reports for conforming to

·         Although SOX reported a price of $91,000, he now says that the actual price is more like $3,000,000. Due to SOX’s complexity, some companies are considering going underground.

·         companies are looking to list their initial public offering (IPO) in foreign countries with more business-friendly regulatory environments.

After Enron, WorldCom, and Sunbeam, the government passed the Sarbanes-Oxley Act in 2002 to prevent future financial scandals. Wilbanks (2016) states that SOX “helped ensure accountability of corporations and the accounting firms they employ by specifying detailed financial reporting requirements and imposing financial penalties and criminal sanctions on those who personally participate in fraud (Walter, 2014)”. (p.23). Its goal has been to establish regulations that boost investor confidence and reduce fraud risks for publicly traded company stakeholders.

The Dodd-Frank Act, like SOX, was passed in 2010 as a direct response from the government to the 2008 financial crisis, which saw several financial institutions engage in practices that hurt the public, the national financial system, and the last recession. “The Act’s goal is to reduce systemic risk within the American financial system through several procedures and institutions,” Mehta (2016) said.

The Act does this by subjecting all major US financial activities to an ultimate financial regulator overseeing systemic risk (p.234). This Act protects the economy from a flawed financial system by proactively regulating unethical practices.

Both Acts were enacted due to extreme financial circumstances that forced the government to regulate the public, investors, and economy. It also requires companies and financial institutions to follow ethical standards and question unethical behavior. However, as CEO Warren Stephens says in the video, “people that are going to cook the books, are going to cook the books… and there is nothing you can do about it.” These Acts place an undue burden on US businesses and limit IPO listings, which some believe hinders economic growth. (2012). The statement is true, but SOX and Dodd-Frank proactively regulate management and financial institutions to prevent unethical behavior.

Finally, both Acts set expectations for auditors to review company operations and financial statements for compliance with regulations and hold them accountable for unethical behavior. To ensure proper operation, both Acts may require review. As previously stated, their goal is to curb unethical behavior, and I agree with the ultimate goal even if it forces some companies to list internationally because SOX/Dodd Frank is only one reason they are not listing in the US.

References

Mehta, S. (2016). Continuing conundrum of mistakes: Where the dodd-frank act went wrong. DePaul Business & Commercial Law Journal, 14(2), 233-248. Retrieved from http://search.ebscohost.com.proxylibrary.ashford.edu/login.aspx?direct=true&db=f5h&AN=118546033&site=eds-live&scope=siteLinks to an external site.

Mintz, S. M., & Morris, R. E. (2014). Ethical obligations and decision making in accounting: Text and cases(3rd ed.). Retrieved from https://www.vitalsource.comLinks to an external site.

Wilbanks, D. (2016). The Sarbanes-Oxley Act. Professional Safety, 61(2), 23–25. Retrieved from http://search.ebscohost.com.proxylibrary.ashford.edu/login.aspx?direct=true&db=bsh&AN=112903797&site=eds-live&scope=siteLinks to an external site.