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Is it time to change SOX?

This article explores the Sarbanes-Oxley Act of 2002, which aims to prevent corporate fraud and protect investors through stringent compliance measures, particularly Section 404. It discusses the challenges of adhering to these regulations, including IT system requirements and increased staffing costs. Key figures, including Henry Paulson and Christopher Cox, suggest that implementation could be more efficient depending on company size. Supporters argue that SOX has improved the reliability of financial statements, ultimately enhancing market efficiency, as seen in the growth of the Wilshire 5000 from 2002 to 2007.

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Is it time to change SOX?

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  1. Is it time to change SOX? SolongoBatbaatar MA0N0228

  2. Sarbanes-Oxley Act of 2002

  3. Purpose of the law • Prevent corporate accounting fraud & financial scandals • Protect investors

  4. Section 404 • It requires companies to have internal & external financial check. First review their own systems for ensuring accurate financial reports and then have them tested by outside auditors.

  5. Problems of complying the Act • IT system • Hire extra employees

  6. Henry PaulsonUS Treasury Secretary • He said, section 404 should be implemented in a more efficient and cost effective manner.

  7. Christopher CoxChairman of Security & Exchange Commission (SEC) - Rule should be adapted to companies based on company size.

  8. Supporters of SOX • Law and related reforms have produced more reliable corporate financial statements, which investors rely on when deciding whether to buy or sell shares.

  9. Duncan W. RichardsonChief equity investment officer • Even the act is much-disparaged requirements for testing internal financial controls could drive gains in corporate productivity and profits.

  10. SOX impact on Market Efficiency • In 2002, the market value of the Wilshire 5000 for all public companies in US, stood at $10.5 trillion. • By April 2007, the value of the Wilshire 5000 was 14.5 trillion

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