The Sarbanes-Oxley Act: Preventing Fraud

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Discussion – Public Accounting
The Sarbanes-Oxley Act enacted in 2002 was a direct result of the increased mistrust in the financial markets in the United States. The Act was therefore aimed at improving financial transparency and corporate governance in institutions, thus preventing fraud. The Act has been crucial in preventing fraud due to the stringent requirements introduced to enhance corporate accountability. More so, the stringent penalties that include criminal charges for offenders and conspirators are also significant deterrents for fraudulent activities. Consequently, the Sarbanes-Oxley Act has had an effect on U. S. companies competing globally due to the increased investor confidence in the market (Chang and Choy). This is because the regulatory framework was enhanced to protect investments, thus increasing the attractiveness of U.S. firms in the global market.
There are several instances where regulatory bodies have fined national public accounting firms in the United States. In 2021, the Securities and Exchange Commission (SEC) charged accounting firm Ernst & Young LLP and its partners approximately $10 million for violating auditor independence rules (U. S. Securities and Exchange Commission). Consequently, to prevent firms and organizations from committing similar violations, regulato...