Accounting and Audit Enforcement

SOX regulations
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Introduction
After a dreadful period of corporate scandals in the United States, the Sarbanes-Oxley Act, or simply SOX regulations, was enacted to restore financial markets' confidence. The act closes loopholes in public companies by extending board members' oversight responsibilities to auditing procedures and financial transactions. Although SOX regulations have effectively addressed financial fraud in other industries, the healthcare industry has experienced a significant rise in fraudulent practices in the last decade. Since 2010, the National Health Care Anti-Fraud Association (NHCAA) estimates that 10% of the country's health outlay is lost each year because of fraud. In 2020, the Department of Justice (DOJ) recovered $1.8 in healthcare fraud settlements and fines. A significant portion of that amount was the $117 million paid by Universal Health Services, Inc. as a settlement for submitting false claims to Medicaid and Medicare. Based on Universal Health Services fraudulent case, this paper examines the effectiveness of SOX regulations in promoting ethical behaviors of for-profit and not-for-profit health care organizations.
Evaluation of SOX regulations regarding for-profit and not-for-profit healthcare organizations
With two notable exceptions, the Sarbanes-Oxley Act provisions primarily affect all publicly traded companies, including those that operate in the healthcare industry. SOX regulations dictate that the lead partner of the auditing company must be replaced after five years. Although this provision does not imply that public healthcare companies must change their external auditing firms after every five years, York-Wyatt (2015) argues that doing so is the only way of complying with SOX regulations. Subjecting not-for-profits healthcare organizations to the Sarbanes-Oxley Act provisions will enhance corporate governance and reduce fraud cases. For instance, Blodgett (2014) indicates that changing the lead auditor after every five years is a good accounting practice for both for-profit and not-for-profit healthcare companies. Since auditing firms may grow accustomed to a firm's financial procedures, this regulation will enable not-for-profit healthcare companies to closely examine their financial practices. Similarly, the regulations regarding the disclosure of all accounting policies to the audit committee also align with good practice standards. Extensive disclosure of internal control practices will enable audit committees to make more informed judgments regarding not-for-profit healthcare companies' financial and management state.
The effectiveness of SOX in regulating the ethical behaviors of for-profit healthcare companies
Although most people believe SOX regulations apply in businesses only, these regulations also apply in healthcare organizations. SOX has an important role in regulating the ethical behavior of healthcare organizations. These organizations are supposed to comply with the codes of ethics. This, in return, assists in boosting the performance of employees and eliminating deceptive behaviors existing in these organizations. Therefore SOX regulations assist these corporations in resolving conflicts, enhancing self-regula...