There has been a corporate outcry, especially concerning the issue of compliance. Such objection is gradually subsiding. With corporations examining and implementing reactions to the SOX Act, they understand that agreement may lead to enhanced practices, whether operational or monetary, facilitated effectiveness and proper and opportune planning. It has also been established that increased transparency allows access to capital (Chhaochharia, Grinstein, Grullon, & Michaely, 2016).
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One direct impact of the SOX Act on corporate governance entails the facilitation of public corporations’ audit committees. Such audit boards get an increased advantage in the oversight of the executive management’s accounting resolutions. The confidence of investors is intricate to assess precisely, though they must have assurance in the market for the financial system to remain centered around the market. SOX Act sought to promote the confidence of investors and reduce the chances of companies swindling institutions and individuals.
The primary objective of the SOX Act was to offer transparency in financial reporting. This was promoted by the definition of the practice of establishing reliable information contained in the Act. SOX conformity benefits businesses through having a starting point for asset evaluation (Saxton & Neely, 2018). It also results in improved control consciousness by owners, which makes the reasons behind the controls essential and their position more apparent in the big picture.
The moment managers and auditors evaluate internal controls with the help of a SOX appraisal. They become more responsive to the significance of their actions in the monetary accomplishment of the company (Bhabra & Hossain, 2018). Increased scrutiny offered by a SOX evaluation makes participants put even more effort into making sure that the practices that are imperative to financial reporting are implemented and managed excellently.
Bhabra, H. S., & Hossain, A. T. (2018). Did the Sarbanes-Oxley Act result in a strategic shift in M&A motives? Managerial Finance, 44(2), 142-159.
Chhaochharia, V., Grinstein, Y., Grullon, G., & Michaely, R. (2016). Product market competition and internal governance: Evidence from the Sarbanes–Oxley Act. Management Science, 63(5), 1405-1424.
Saxton, G. D., & Neely, D. G. (2018). The relationship between Sarbanes–Oxley policies and donor advisories in nonprofit organizations. Journal of Business Ethics, 1-19.