IS SARBANES-OXLEY A FAILURE?

          First off, what is Sarbanes-Oxley? Sarbanes-Oxley is a law enacted after the accounting scams of Enron and WorldCom were brought into light. It is a way to protect the shareholders and general public from accounting errors and fraudulent practices in the working economy. Part of the requirements for Sarbanes-Oxley is to have the Chief Financial Officer and the Chief Executive Officer sign off on the financial statements to say they are vouching that these financial statements are correct and not fraudulent.

After knowing this, why would you this Sarbanes-Oxley is a failure? Similar to times during the Enron failure, Lehman Brothers have been attempting to work their accounting magic to impair their accounting statements. One way they are doing this is to sell securities then purchase them back by borrowing money so their finances look great when reporting times come around. Since Sarbanes-Oxley was enacted to prevent events like this from occurring again, many people are wondering what is the point of having Sarbanes-Oxley if people are still getting through the loop holes.

While this is a great point to ponder, there are always going to be loop holes no matter how hard someone tries to get rid of them. Investors are starting to question some of the companies they have invested in since it has been proven once again that fraud can still go undetected. Who can blame them though? The people who the Sarbanes-Oxley Act have since then been questioned about the effectiveness of this law.

Their responses were very interesting to say the least. One can enact as many laws as they wish, but there will always be loop holes through, or ways to go undetected. The purpose of these laws is to shine a brighter light on to many situations in order to understand them and to process them with more ease. All accounting issues will have murkiness about them. The laws job is to attempt to clear away some of those murky areas.

They also brought forward a very good point about laws put forth by the federal government. Just because people break those laws does not mean that we should consider them to be failures and repeal them. For instance, we have a law that disallows murdering someone, yet there are murders committed each and every day. Just because people choose to not follow law does not mean it is a failure. The laws are there in order to attempt to lessen the mishaps.

Therefore, I believe we should not repeal the Sarbanes-Oxley act, which presidential candidate Newt Gingrich suggested previously in his presidential campaign. If we were to repeal this act, it would just open the gates and allow people to go about their fraudulent ways. Do I believe we should just sit back and do nothing though? No. With each event of fraud, I believe the Sarbanes-Oxley Act should be looked at and reevaluated in order to try to prevent acts like these from occurring in the future.