Inspired by the Enrons and Worldcoms of the late 90’s, the Sarbanes-Oxley Act (“Sarbox”) introduced stricter regulatory controls and requirements for public company accounting practices, with a goal of improving accounting “transparency”.
Three years later the question is being asked – is it working?
In theory, tighter controls and greater personal responsibility for CEOs and CFOs should create an incentive for companies to disclose more and misrepresent those disclosures less. However, corporate stakeholders live in the world of practice – not theory – and in practice the effects of Sarbox seem to be mixed at best. “According to a new poll conducted by The Wall Street Journal and Harris Interactive, 55 percent of U.S. investors believe that financial and accounting regulations governing publicly held companies are too lenient. That figure rises to 77 percent for male investors ages 45 to 54.”
See full Report, in pdf format.
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