It has been 11 years since the Sarbanes-Oxley Act (SOX Act) was passed by congress. The act was enacted to help put an end to the unethical behavior practiced by some public companies. The act compels all public companies to publicize their financial statements regularly. The act is meant to instill confidence among the investors by protecting them from fraudulent practices employed by some companies regarding financial reporting (Hall & Liedtka 2007). Other reasons were to ensure that companies play their part in corporate social responsibility, fight corruption and strengthen disclosure.
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Ethical decision making
Ethical decision-making is the process of making decisions where the company or organization is faced with problems that can be solved using various methods; the company has to choose a suitable method to solve the problem. The process of choosing the best problem-solving method is referred to as ethical decision-making. These decisions will help yield more returns for the company while adhering to moral and social values.
Some of the ethical decisions include.
Section 406 of the act requires that all public companies disclose their financial statements (Hall & Liedtka 2007). The information has to be made public after a fiscal year. The act demands that this information be accurate. The senior financial officer is charged with this responsibility. It should be done honestly while adhering to the law.
Good investment decision
The Sarbanes-Oxley Act compels public companies to share all financial information with the general public (Melvin 2011). This has coerced the management of these companies to carefully consider various investment opportunities and how they will boost the financial position of the businesses.
Corporate social responsibility
A company that has high returns is expected to give back to society (Hall & Liedtka 2007). Public companies should ensure they take part in corporate social responsibility. The government expects companies to take part in social responsibility to uplift the lives of the community living around the company.
When presenting the financial statements the senior financial officer should explain to the investors how the business is performing (Melvin 2011). This will help public companies to make conscious decisions that will enable the company to realize high profits. If the company makes losses the management should give the public and their investors a profit warning. This should be done before releasing their financial statements.
By publicly declaring a company’s financial position public the company will be compelled to pay its taxes. Taxes help governments provide the general public with public goods and provide them with other essential commodities (Melvin 2011).
Criminal penalties for which the act provides
The government has put in place measures to make sure that this act is followed to the latter.
Penalty for altering documents
The law is clear that any individual found guilty of altering, concealing, or destroying any financial document is liable to a jail term of not more than twenty years. This is under section 1520 of the Sarbanes-Oxley Act (Hall & Liedtka 2007).
Keeping financial records
Accountants, who audit companies, should keep the records for five years. If any accountant breaks this rule he or she is liable to a fine, a jail term not exceeding ten years, or both (Hall & Liedtka 2007).
The Sarbanes-Oxley Act is the only avenue through which the government seeks to protect investors from unethical practices by some public companies. The penalties put in place will ensure the companies adhere to the Sarbanes-Oxley Act.
Hall, J. A., & Liedtka, S. L. (2007). The Sarbanes-Oxley Act. Communications of the ACM, 50(3), 95-100.
Melvin, S. P. (2011). The legal environment of business: A managerial approach: Theory to practice. New York, NY: McGraw-Hill/Irwin.