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In steps Sarbanes-Oxley, the 2002 legislation that was supposed to protect investors from fraud by requiring companies to be more diligent in creating and maintaining internal controls and by forcing public company auditors to work harder. Tangible benefits from the legislation are elusive. People would like to think that the legislation has forced companies to have better internal controls, and therefore fraud risks are reduced. Yet there is no real evidence that fraud risk or actual fraud has been reduced because of Sarbanes-Oxley.
Secondly Companies with dishonest or incompetent executives will have fraud problems no matter what the legislation says.
Thirdly the bad management is also a key role
Bad management will be bad management no matter what the regulations say. Good management will be good in spite of regulations as well. Invest in companies in which honesty is at the forefront of their business model and is demonstrated each day as they conduct business.
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