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Preventing the instances of corporate fraud in the context of the contemporary environment of the global economy is an admittedly challenging task. In the realm of the global economy, where a company is exposed to an array of external factors that cannot possibly be controlled, the threats of its financial data being used for malicious purposes increase exponentially. The introduction of the Sarbanes-Oxley regulation could be viewed as an attempt to prevent the instances of financial fraud from occurring in the companies operating in the environment of the global market. As the further application of the concept to the realm of the global market has shown, the Sarbanes-Oxley Act allows viewing the problems in the contemporary financial landscape of the global market from the societal, economic, and ethic standpoint. As a result, a comprehensive strategy for addressing the issue of financial fraud as a phenomenon can be created.
Therefore, the analysis of the effects that the introduction of the Sarbanes-Oxley Act has had on the global market can be viewed as the focus of the paper. The discussion revolves around the opportunities that the regulation opens in front of global companies, especially as far as the prevention of corporate fraud is concerned. The author focuses on determining the advantages and the disadvantages of the regulation as the tool of enhancing the transparency of the financial transactions carried out in the global economy setting. Although the author makes it quite clear that the Sarbanes-Oxley Act could use more clarity, they admit that it is likely to change the realm of the global market by preventing the instances of financial fraud successfully (Jasso, 2002).
The theoretical foundation for the article is impeccable. One might argue that applying the theory of commerce to the problem of corporate fraud in the global market might not be the right approach to the assessment of the Sarbanes-Oxley Act and its effects on the target environment. However, a closer look at the way in which the essential tenets of the theory are applied to the issue will reveal that there is a close connection between the theory and the regulation under analysis. Particularly, the identified approach allows focusing on the factors that define the course of actions chosen by the participants involved in market relationships. In other words, the theoretical framework sheds light on the personal interests that the parties under discussion pursue when making specific decisions and choosing particular behavioral patterns (Jasso, 2002).
Furthermore, the theoretical approach used by the author of the article permits identifying the dents in the current leadership strategy deployed by most corporate leaders nowadays. Specifically, the lack of supervision, which can be viewed as a side effect of the expanded supply chain, is listed among the essential reasons for the management and leadership failure when it comes to addressing the issue of corporate fraud. As a result, an all-embracive analysis of the contemporary global market environment with its flaws, opportunities, and threats becomes a possibility.
Finally, the line of arguments chosen by the author is, in fact, very sensible. The SOX Act is, in fact, very expensive, and it is likely to cost global companies an impressive amount of money to implement its provisions so that the essential financial transactions could be supervised and that the principles of transparency could be promoted in the global market realm. Therefore, the possibility of companies being against innovation instead of viewing it as the tool for improving the crucial corporate processes is very probable (Jasso, 2002).
It would be wrong to claim, though, that the author’s argument is completely flawless. For instance, the author of the article does not mention some of the positive effects that the SOX Act is bound to have on the subject matter. Particularly, the fact that the rates of satisfaction are bound to rise among the corporate shareholders seeing that the transparency of the companies’ actions will increase exponentially.
Furthermore, the author of the article views the Section 404 as the primary problem of the regulation, pointing to the confusion that it is likely to lead to: “Titled ‘Management Assessment of Internal Controls, Section 404 is what the end-user of SOX, that is, the corporation itself and its CPA firm, has the most difficult due to the compliance standards that essentially add the marginal costs to the firm” (Jasso, 2002, p. 10). However, casting a closer look at the identified section will show that it, in fact, opens new possibilities for the organizations operating in the global market realm by stressing the significance of internal controls.
It could be argued that the given element of the SOX regulation prevents losing track of the financial transactions, as well as the rest of the crucial processes carried out within the organization. Jasso (2002) argues that following the solution prescribed in Section 404 is bound to have dire financial consequences for organizations, especially for SMEs. While there is a grain of truth in the author’s argument, one must admit that sustainable use of resources will allow meeting the specified guidelines successfully and at the same time retain the required amount of financial assets (Jasso, 2002).
The article provides a lot of food for thoughts. Shedding light on some of the most controversial aspects of the contemporary economic and legal characteristics of the global market, the study emphasizes the need for the introduction of a set of more rigid standards for ethical behavior in the global economy. Although the Sarbanes-Oxley Act can be viewed as a temporary solution to the current financial fraud issue, it is only a temporary tool for managing the issue. The root cause of the problem lies deep beneath the economic interior of the global market and is, in fact, related directly to the values and ethical standards that organizations uphold.
Therefore, it is imperative to reconsider the ethical premises on which modern economic relationships are built. With the promotion of a set of rigid values, legal regulations such as the Sarbanes-Oxley Act will only serve the decorative purpose of guiding the parties involved in the global economic relationships. The primary principles on which the decision-making processes in the target economic environment will be based, in their turn, will incorporate the crucial values such as the principles of transparency, honesty, and integrity. Thus, prerequisites for reducing the instances of corporate fraud significantly and even possibly eradicating it can be created. Although the road to the improvement of the financial relationships is bound to be difficult, it is worth pursuing as the foil for the further successful evolution of the global economy and cross-cultural interactions.
Jasso, S. D. (2002). Sarbanes-Oxley – Context & theory: Market failure, information asymmetry & the case for regulation. Journal of Academy of Business and Economics, 9(3), 1-13.