The article was a proposal that tried to justify the reason that congress should repeal the Sarbanes-Oxley Act (SOX Act) of 2002. The act is seen as a problem because individual felt that the act was only put in place so government official could feel better about addressing some issues of popular concern rather than resolving the issue. According to Niskanen the SOX act of 2002 is unnecessary, harmful, and inadequate (2006). Punishments under this act included jail time and loss of personal property.
The act was viewed as unnecessary because the stock exchange has already addressed and implemented procedures to deal with most of the issues presented in the SOX act of 2002. Those implementations include accounting standards, prosecution for fraud, audits, and financial reporting procedures. Officials felt that both acts addressed the same issues therefore, congress should deem the SOX act of 2002 unnecessary. The SOX act of 2002 was viewed as harmful because it would “reduce the incentive of corporate executives and directors to seek legal advice” (Niskanen, 2006).
It was also seen as harmful because it cause a ban on loans to corporate officer which would pose a problem for compensation. The act was viewed as inadequate because it “failed to identify and correct the major problems of accounting, auditing, taxation, and corporate governance that have invited corporate malfeasance and increased the probability of bankruptcy” (Niskanen, 2006).
Recommendation to make the act better included congress needed to state more clearly that criminal penalties under the SOX act of 2002 needed proof of personal involvement and criminal intent. Another recommendation was to reduce the cost it took to implement the act. LEGAL ISSUE
The legal business issues raised in the article monopoly and unconstitutional. Monopoly because SOX act would have sole control over punishments. Unconstitutional because private businesses were not targeted therefore, public businesses felt that all businesses did not have the same right. MANAGERIAL PERSPECTIVE
The legal issues of the SOX act of 2002 affect the way business operate. Businesses have to have certain measures of internal control with the act. The would also have to report financial accounts accurately and follow certain accounting procedure in their day to day business activities. The issued implemented in the SOX act of 2002 could have been avoided if business owners and executives would have exercised fairness and accuracy in the first place. Government would not have had to step in and make these implantations.
Niskanen, W. A. (2006). Congress Should Repeal the Sarbanes-Oxley Act. Retrieved