The Sarbanes-Oxley Act enacted in the year 2002 that seeks to protectthe investors (Black, 2013). The move aims at safeguarding theshareholders of a company and the general public from the probableaccounting errors that may ensue through accounting or fraudpractices. It seeks to enhance corporate disclosure’s accuracy.Companies have a responsibility to ensure that they operate incompliance with the requirements of the Act (Abdioglu et al., 2015).
Justification of the Act
The Act has been instrumental in ensuring that even the businesstransactions conducted are accounted for to enhance transparency. Anexample of where the Act has come into application was when theowners of Mac were required to make an additional payment of five USdollars to get the next generation Wi-Fi features on the devices. Themove aimed at ensuring that the Apple remains within the provisionsof the Act. The decision could be viewed by other persons as apretext when it is accountability. However, in defense, Apple Inc didstate that it did not want to be regarded as to be giving away afeature of a product that had been sold not taking into considerationmeasures of accounting needed to be included (Duarte et al., 2014).The company is working in compliance with the Act even though it canbe seen as a way of oppressing the consumers.
The Act has to be in place since it serves to ensure that there isthe highest level of accountability in the organization. Firms thatoperate in a dishonest manner are subject to adhere to therequirements of the Act eliminating chances of fraudulent dealings inthe organization. The significant role played by the Act negates theneed to ensure that it is maintained and companies made to adhere toits requirements.
Abdioglu, N.,Bamiatzi, V., Cavusgil, S. T., Khurshed, A., & Stathopoulos, K.(2015).
Informationasymmetry, disclosure and foreign institutional investment: Anempirical
investigation ofthe impact of the Sarbanes-Oxley Act. International BusinessReview.
Black, J. (2013).Ramifications of Sarbanes-Oxley corporate governance legislationon initial
public offeringsof research-intensive firms. TEMPLE UNIVERSITY.
Duarte, J., Kong,K., Siegel, S., & Young, L. (2014). The Impact of theSarbanes–Oxley Act on
Shareholders andManagers of Foreign Firms. Review of Finance, 18(1),417-455.