The Sarbanes-Oxley Act Essay

Custom Student Mr. Teacher ENG 1001-04 12 June 2016

The Sarbanes-Oxley Act


Hunter’s article examines how the Sarbanes-Oxley Act (SOX Act) is too stringent and gives too much power over companies to governing bodies, i.e. the Public Company Accounting Oversight Board (PCAOB) (Hunter, 2007). It discusses how the SOX Act is unfair to domestic and foreign and small and large companies, their shareholders, and the public. The piece explains how the Act may compel some companies to use unethical actions to conduct business and prevent accruing penalties (Hunter, 2007).


The article exposes how the SOX Act imposes a never-ending strain of compliance obligations that have not been helpful to businesses, but has drained the companies of revenue and time (Hunter, 2007). Hunter explains that instituting the PCAOB allows the board to inflict massive penalties on higher-ups within a business, i.e. CEOs and CFOs, through the SOX Act. According to Hunter (2007), “the Board is permitted to make any changes it wishes, which places companies in the position of forever trying to hit a moving target”, (Punishing the Innocent: The Sarbanes-Oxley Act, p. 24, para. 2). Because of this, the author believes the Sarbanes-Oxley Act persuades companies to act unethically by conducting some business verbally in-person or over the telephone, thus negating the need to report this information to the PCAOB or SEC and all but ignoring the SOX Act (Hunter, 2007). Foreign companies also face the brunt of the negative aspects of the SOX Act.

Companies on the U.S. exchange lists already endure requirements placed on them by their own countries, and the SOX Act only burdens them more (Hunter, 2007). The article affirms that, “According to the law, a foreign company listed on a U.S. exchange must meet all Sarbanes-Oxley requirements if its shareholders include at least 300 Americans”, “Punishing the Innocent: The Sarbanes-Oxley Act, p. 26, para. 1). The problem with this is that is coerces foreign companies to follow U.S. laws, as well as those already in effect in their home countries. There is one thing that counteracts the SOX Act. In litigation against the PCAOB, an accounting firm based in Nevada instituted the assistance of a lobbying group in Washington, D.C. to prove that the SOX Act giving the PCAOB the right to place fines and other penalties on businesses, without being overseen by the government, violates the separation-of-powers clause of the U.S. Constitution (Hunter, 2007).


Legal issues, like the ones discussed in the previous section can be damaging to a business and those involved. For instance, if companies or higher-ups within them are found to be engaging in these unethical practices, they will likely suffer civil and criminal fines, as well as serving time in jail. While this is an example of unethical behavior in business, many companies consider this defensive management. Hunter states, “ with Sarbanes-Oxley bureaucrats watching everyone in corporate America, there can be no doubt that companies are practicing defensive management”, (Punishing the Innocent: The Sarbanes-Oxley Act, p. 25, para. 8).

CEOs and CFOs who lead companies that practice these dishonest methods to hide that they are avoiding the SOX Act and PCAOB regulations may face penalties in the form of fines up to the millions of dollars and ten to 20 years in prison (Hunter, 2007). When considering foreign businesses and the SOX Act, some foreign companies may choose not to be part of the U.S. exchanges, thus depleting revenue for them and reducing available products in the United States. Managers must remember that laws are put in place for a reason, and while some laws may seem unfair, they must still be respected and followed. Managers should make sure their businesses meet the standards of the PCAOB and the SOX Act to avoid litigation and penalties.

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  • University/College: University of Arkansas System

  • Type of paper: Thesis/Dissertation Chapter

  • Date: 12 June 2016

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