Business & Finance Question

timer Asked: Nov 21st, 2016

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Sarbanes-Oxley and Corporate Governance Paper

How Does the Courts Decision Impact Other Provisions of SOX

Running head: SARBANES-OXLEY AND CORPORATE GOVERNANCE PAPER Sarbanes-Oxley and Corporate Governance Paper Anna Alcaraz, Amber Dorton, Jacob Guynn, Jennifer Hall, Nick Johnson ETH/321 November 21st, 2016 Laurie Wicker 1 SARBANES-OXLEY AND CORPORATE GOVERNANCE PAPER 2 Sarbanes-Oxley and Corporate Governance Paper The Sarbanes-Oxley Act (SOX) was enacted by Congress in 2002 to address bad accounting practices, in an attempt to protect investors from the possibility of fraudulent accounting activities by corporations, which was made apparent by several companies during the last decade, such as Eron for example (Hess, 2010). In the case of Free Enterprise Fund v. Public Company Accounting Oversight Board, the courts determined that “The remaining provisions are not incapable of functioning independently, and nothing in the statute’s text or historical context makes it evident that Congress, faced with the limitations imposed by the Constitution, would have preferred no Board at all to a Board whose members are removable at will” ((Reed, Pagnattaro, Cahoy, Shedd & Morehead, 2013, p. 481). Thus begs the following to be answered; should PCAOB member be selected from investment communities that utilize audited financials, why or why not, does the court’s ruling then impact the validity of the board and other provisions of the SOX? Should PCAOB Members Be Selected From Investment Communities Why Or Why Not How does the Courts Decision impact the Validity of the Board Basically the SOX Act mandated strict reforms to improve financial disclosures from corporations, intending to prevent accounting fraud. Moreover, among its many provisions, Sarbanes-Oxley created a five-member Public Company Accounting Oversight Board (PCAOB) to oversee the auditors and accountants of public companies. The five members of the Board (PCAOB), including the Chairman, are appointed to staggered five-year terms by the Securities and Exchange Commission (SEC), after consultation with the Chairman of the Board of Governors of the Federal Reserve System and the Secretary of the Treasury. Recently, the SARBANES-OXLEY AND CORPORATE GOVERNANCE PAPER 3 Supreme Court ruled that the PCAOB was unconstitutional due to the way its members were appointed. The 5-4 decision did not question the act's constitutionality as a whole, and found that it should remain a fully operative law (Hess, 2010). How Does the Courts Decision Impact Other Provisions of SOX Conclusion (I will finish when all the parts of present) SARBANES-OXLEY AND CORPORATE GOVERNANCE PAPER 4 References Hess, P. (2010). Ruling in Sarbanes-Oxley upholds constitutional validity of act, attorneys say. Retrieved from PCAOB. (2016). Retrieved from Reed, O. L., Pagnattaro, M. A., Cahoy, D. R., Shedd, P. J., & Morehead, J. W. (2013). The Legal and Regulatory Environment of Business (16th ed.). New York, NY: McGraw-Hill Irwin.

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