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1. History

The SarbanesOxley Act of 2002enacted July 30, 2002, also known as the

'Public Company Accounting Reform and Investor Protection Act' (in the

United State Senate) and 'Corporate and Auditing Accountability and

Responsibility Act' (in the United StatesHouse of Representatives) and more

commonly called SarbanesOxley, Sarbox or SOX, is a United States

federal law that set new or enhanced standards for all U.S. public company

boards, management and public accounting firms. It is named after sponsors

U.S. Senator Paul Sarbanes (Democratic party US - Maryland) and U.S.

RepresentativeMichael G. Oxley (Republican party US - Ohio). As a result of

SOX, top management must now individually certify the accuracy of financial

information. In addition, penalties for fraudulent financial activity are much

more severe. Also, SOX increased the independence of the outside auditors

who review the accuracy of corporate financial statements, and increased the

oversight role of boards of directors.

The bill was enacted as a reaction to a number of major corporate and

accounting scandals including those affecting Enron, Tyco International,Adelphia (communications corporation), Peregrine Systems and WorldCom.

These scandals, which cost investors billions of dollars when the share prices

of affected companies collapsed, shook public confidence in the USsecurities

markets.

The act contains 11 titles, or sections, ranging from additional corporate board

responsibilities to criminal penalties, and requires the Securities and

Exchange Commission (SEC) to implement rulings on requirements to comply

with the law. Harvey Pitt, the 26th chairman of the SEC, led the SEC in the

adoption of dozens of rules to implement the SarbanesOxley Act. It created

a new, quasi-public agency, thePublic Company Accounting Oversight Board,

or PCAOB, charged with overseeing, regulating, inspecting and disciplining

accounting firms in their roles as auditors of public companies. The act also

covers issues such as auditor independence,corporate governance,internal

control assessment, and enhanced financial disclosure. The nonprofit arm of
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Financial Executives International (FEI), Financial Executives Research

Foundation (FERF), completed extensive research studies to help support the

foundations of the act. completed extensive research studies to help support

the foundations of the act.

The act was approved by the House by a vote of 423 in favor, 3 opposed,

and 8 abstaining and by the Senate with a vote of 99 in favor, 1 abstaining.

President George W. Bush signed it into law, stating it included "the most far-

reaching reforms of American business practices since the time ofFranklin D.

Roosevelt.The era of low standards and false profits is over; no boardroom in

America is above or beyond the law."

In response to the perception that stricter financial governance laws are

needed, SOX-type laws have been subsequently enacted inJapan,Germany,

France,Italy,Australia,Israel,India,South Africa,andTurkey.

Debate continues over the perceived benefits and costs of SOX. Opponents

of the bill claim it has reduced America's international competitive edge

against foreign financial service providers, saying SOX has introduced an

overly complex regulatory environment into U.S. financial markets.

Proponents of the measure say that SOX has been a "godsend" for improving

the confidence of fund managers and other investors with regard to the

veracity of corporate financial statements.

2. Events contributing to the adoption of SarbanesOxley

A variety of complex factors created the conditions and culture in which a

series of large corporate frauds occurred between 20002002. The

spectacular, highly publicized frauds atEnron,WorldCom,andTyco exposed

significant problems with conflicts of interest and incentive compensation

practices. The analysis of their complex and contentious root causes

contributed to the passage of SOX in 2002.

Auditor conflicts of interest: Prior to SOX, auditing firms, the primary

financial "watchdogs" for investors, were self-regulated. They also
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performed significant non-audit or consulting work for the companies

they audited. Many of these consulting agreements were far more

lucrative than the auditing engagement. This presented at least the

appearance of a conflict of interest. For example, challenging the

company's accounting approach might damage a client relationship,

conceivably placing a significant consulting arrangement at risk,

damaging the auditing firm's bottom line.

Boardroom failures: Boards of Directors, specifically Audit

Committees, are charged with establishing oversight mechanisms for

financial reporting in U.S. corporations on the behalf of investors.

These scandals identified Board members who either did not exercise

their responsibilities or did not have the expertise to understand the

complexities of the businesses. In many cases, Audit Committee

members were not truly independent of management.

Securities analysts' conflicts of interest: The roles of securities

analysts, who make buy and sell recommendations on company stocks

and bonds, and investment bankers, who help provide companies

loans or handle mergers and acquisitions, provide opportunities forconflicts. Similar to the auditor conflict, issuing a buy or sell

recommendation on a stock while providing lucrative investment

banking services creates at least the appearance of a conflict of

interest.

Inadequate funding of the SEC: The SEC budget has steadily

increased to nearly double the pre-SOX level. In the interview cited

above, Sarbanes indicated that enforcement and rule-making are more

effective post-SOX.

Banking practices: Lending to a firm sends signals to investors

regarding the firm's risk. In the case of Enron, several major banks

provided large loans to the company without understanding, or while

ignoring, the risks of the company. Investors of these banks and their

clients were hurt by such bad loans, resulting in large settlementpayments by the banks. Others interpreted the willingness of banks to

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lend money to the company as an indication of its health and integrity,

and were led to invest in Enron as a result. These investors were hurt

as well.

Internet bubble: Investors had been stung in 2000 by the sharp

declines in technology stocks and to a lesser extent, by declines in the

overall market. Certain mutual fund managers were alleged to have

advocated the purchasing of particular technology stocks, while quietly

selling them. The losses sustained also helped create a general anger

among investors.

Executive compensation: Stock option and bonus practices,combined with volatility in stock prices for even small earnings

"misses," resulted in pressures to manage earnings. Stock options

were not treated as compensation expense by companies,

encouraging this form of compensation. With a large stock-based

bonus at risk, managers were pressured to meet their targets.

3. Major elements

1. Public Company Accounting Oversight Board (PCAOB)

Title I consists of nine sections and establishes the Public Company

Accounting Oversight Board, to provide independent oversight of public

accounting firms providing audit services ("auditors"). It also creates a

central oversight board tasked with registering auditors, defining the

specific processes and procedures for compliance audits, inspecting

and policing conduct and quality control, and enforcing compliance with

the specific mandates of SOX.

2. Auditor Independence

Title II consists of nine sections and establishes standards for external

auditor independence, to limit conflicts of interest. It also addresses

new auditor approval requirements, audit partner rotation, and auditor
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reporting requirements. It restricts auditing companies from providing

non-audit services (e.g., consulting) for the same clients.

3. Corporate Responsibility

Title III consists of eight sections and mandates that senior executives

take individual responsibility for the accuracy and completeness of

corporate financial reports. It defines the interaction of external auditors

and corporate audit committees, and specifies the responsibility of

corporate officers for the accuracy and validity of corporate financial

reports. It enumerates specific limits on the behaviors of corporate

officers and describes specific forfeitures of benefits and civil penaltiesfor non-compliance. For example, Section 302 requires that the

company's "principal officers" (typically theChief Executive Officer and

Chief Financial Officer) certify and approve the integrity of their

company financial reports quarterly.

4. Enhanced Financial Disclosures

Title IV consists of nine sections. It describes enhanced reporting

requirements for financial transactions, including off-balance-sheet

transactions, pro-forma figures and stock transactions of corporate

officers. It requires internal controls for assuring the accuracy of

financial reports and disclosures, and mandates both audits and

reports on those controls. It also requires timely reporting of material

changes in financial condition and specific enhanced reviews by the

SEC or its agents of corporate reports.

5. Analyst Conflicts of Interest

Title V consists of only one section, which includes measures designed

to help restore investor confidence in the reporting of securities

analysts. It defines the codes of conduct for securities analysts and

requires disclosure of knowable conflicts of interest.

6. Commission Resources and Authority
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Title VI consists of four sections and defines practices to restore

investor confidence in securities analysts. It also defines the SEC's

authority to censure or bar securities professionals from practice and

defines conditions under which a person can be barred from practicing

as a broker, advisor, or dealer.

7. Studies and Reports

Title VII consists of five sections and requires theComptroller General

and the SEC to perform various studies and report their findings.

Studies and reports include the effects of consolidation of public

accounting firms, the role of credit rating agencies in the operation ofsecurities markets, securities violations and enforcement actions, and

whether investment banks assistedEnron,Global Crossing and others

to manipulate earnings and obfuscate true financial conditions.

8. Corporate and Criminal Fraud Accountability

Title VIII consists of seven sections and is also referred to as the

"Corporate and Criminal Fraud Accountability Act of 2002". It describes

specific criminal penalties for manipulation, destruction or alteration of

financial records or other interference with investigations, while

providing certain protections for whistle-blowers.

9. White Collar Crime Penalty Enhancement

Title IX consists of six sections. This section is also called the "White

Collar Crime Penalty Enhancement Act of 2002." This section

increases the criminal penalties associated withwhite-collar crimes and

conspiracies. It recommends stronger sentencing guidelines and

specifically adds failure to certify corporate financial reports as a

criminal offense.
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10.Corporate Tax Returns

Title X consists of one section. Section 1001 states that the Chief

Executive Officer should sign the company tax return.

11.Corporate Fraud Accountability

Title XI consists of seven sections. Section 1101 recommends a name

for this title as "Corporate Fraud Accountability Act of 2002". It

identifies corporate fraud and records tampering as criminal offenses

and joins those offenses to specific penalties. It also revises sentencing

guidelines and strengthens their penalties. This enables the SEC to

resort to temporarily freezing transactions or payments that have been

deemed "large" or "unusual".

4. Analyzing the cost-benefits of SarbanesOxley

A significant body of academic research and opinion exists regarding the

costs and benefits of SOX, with significant differences in conclusions. This is

due in part to the difficulty of isolating the impact of SOX from other variablesaffecting the stock market and corporate earnings. Section 404 of the act,

which requires management and the external auditor to report on the

adequacy of a company's internal control on financial reporting, is often

singled out for analysis. Conclusions from several of these studies and related

criticism are summarized below:

Compliance costs

FEI Survey (Annual): Finance Executives International (FEI) provides

an annual survey on SOX Section 404 costs. These costs have

continued to decline relative to revenues since 2004. The 2007 study

indicated that, for 168 companies with average revenues of $4.7 billion,

the average compliance costs were $1.7 million (0.036% of revenue).

The 2006 study indicated that, for 200 companies with average

revenues of $6.8 billion, the average compliance costs were $2.9million (0.043% of revenue), down 23% from 2005. Cost for
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decentralized companies (i.e., those with multiple segments or

divisions) were considerably more than centralized companies. Survey

scores related to the positive effect of SOX on investor confidence,

reliability of financial statements, and fraud prevention continue to rise.

However, when asked in 2006 whether the benefits of compliance with

Section 404 have exceeded costs in 2006, only 22 percent agreed.

Benefits to firms and investors

Arping/Sautner (2010): This research paper analyzes whether SOX

enhanced corporate transparency. Looking at foreign firms that are

cross-listed in the US, the paper indicates that, relative to a controlsample of comparable firms that are not subject to SOX, cross-listed

firms became significantly more transparent following SOX. Corporate

transparency is measured based on the dispersion and accuracy of

analyst earnings forecasts.

Institute of Internal Auditors (2005): The research paper indicates that

corporations have improved their internal controls and that financial

statements are perceived to be more reliable.

Effects on exchange listing choice of non-U.S. companies

Some have asserted that SarbanesOxley legislation has helped

displace business from New York to London, where the Financial

Services Authority regulates the financial sector with a lighter touch. In

the UK, the non-statutory Combined Code of Corporate Governance

plays a somewhat similar role to SOX. See Howell E. Jackson & Mark

J. Roe, "Public Enforcement of Securities Laws: Preliminary Evidence"

(Working Paper January 16, 2007). London based Alternative

Investment Market claims that its spectacular growth in listings almost

entirely coincided with the Sarbanes Oxley legislation. In December

2006Michael Bloomberg,New York's mayor, andCharles Schumer,a

U.S. senator from New York, expressed their concern.
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The SarbanesOxley Act's effect on non-U.S. companies cross-listed

in the U.S. is different on firms from developed and well regulated

countries than on firms from less developed countries according to

Kate Litvak. Companies from badly regulated countries see benefits

that are higher than the costs from better credit ratings by complying to

regulations in a highly regulated country (USA), but companies from

developed countries only incur the costs, since transparency is

adequate in their home countries as well. On the other hand, the

benefit of better credit rating also comes with listing on other stock

exchanges such as theLondon Stock Exchange.

5. Implementation of key provisions

I. SarbanesOxley Section 302: Disclosure controls

Under SarbanesOxley, two separate sections came into effectone civil and

the other criminal. (Section 302) (civil provision); (Section 906) (criminal

provision).

Section 302 of the Act mandates a set of internal procedures designed to

ensure accurate financial disclosure. The signing officers must certify that

they are "responsible for establishing and maintaining internal controls" and

"have designed such internal controls to ensure that material information

relating to the company and its consolidated subsidiaries is made known to

such officers by others within those entities, particularly during the period in

which the periodic reports are being prepared." [15 U.S.C. 7241(a)(4)]The

officers must "have evaluated the effectiveness of the company's internalcontrols as of a date within 90 days prior to the report" and "have presented in

the report their conclusions about the effectiveness of their internal controls

based on their evaluation as of that date."

External auditors are required to issue an opinion on whether effective internal

control over financial reporting was maintained in all material respects by

management. This is in addition to the financial statement opinion regarding
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the accuracy of the financial statements. The requirement to issue a third

opinion regarding management's assessment was removed in 2007.

II. SarbanesOxley Section 303: Improper Influence on

Conduct of Audits

Rules To Prohibit. It shall be unlawful, in contravention of such rules or

regulations as the Commission shall prescribe as necessary and appropriate

in the public interest or for the protection of investors, for any officer or

director of an issuer, or any other person acting under the direction thereof, to

take any action to fraudulently influence, coerce, manipulate, or mislead any

independent public or certified accountant engaged in the performance of anaudit of the financial statements of that issuer for the purpose of rendering

such financial statements materially misleading.

III. SarbanesOxley Section 401: Disclosures in periodic

reports (Off-balance sheet items)

The bankruptcy ofEnron drew attention to off-balance sheet instruments that

were used fraudulently. During 2010, the court examiner's review of the

Lehman Brothers bankruptcy also brought these instruments back into focus,

as Lehman had used an instrument called "Repo 105" to allegedly move

assets and debt off-balance sheet to make its financial position look more

favorable to investors. Sarbanes-Oxley required the disclosure of all material

off-balance sheet items. It also required an SEC study and report to better

understand the extent of usage of such instruments and whether accounting

principles adequately addressed these instruments; the SEC report wasissued June 15, 2005. Interim guidance was issued in May 2006, which was

later finalized. Critics argued the SEC did not take adequate steps to regulate

and monitor this activity.
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IV. SarbanesOxley Section 404: Assessment of internal

control

The most contentious aspect of SOX is Section 404, which requires

management and the external auditor to report on the adequacy of the

company's internal control on financial reporting (ICFR).

This is the most costly aspect of the legislation for companies to implement,

as documenting and testing important financial manual and automated

controls requires enormous effort.

Under Section 404 of the Act, management is required to produce an "internal

control report" as part of each annual Exchange Act report. The report must

affirm "the responsibility of management for establishing and maintaining an

adequate internal control structure and procedures for financial reporting."

The report must also "contain an assessment, as of the end of the most

recent fiscal year of theCompany,of the effectiveness of the internal control

structure and procedures of the issuer for financial reporting." To do this,

managers are generally adopting an internal control framework such as that

described in COSO (Committee of Sponsoring Organizations of the Tread

way Commission).

It is generally consistent with the PCAOB's guidance, but intended to provide

guidance for management. Both management and the external auditor are

responsible for performing their assessment in the context of atop-down risk

assessment, which requires management to base both the scope of its

assessment and evidence gathered on risk. This gives management widerdiscretion in its assessment approach. These two standards together require

management to:

Assess both the design and operating effectiveness of selected internal

controls related to significant accounts and relevant assertions, in the

context of material misstatement risks;

Understand the flow of transactions, including IT aspects, in sufficient

detail to identify points at which a misstatement could arise;
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Evaluate company-level (entity-level) controls, which correspond to the

components of theCOSO framework;

Perform a fraud risk assessment;

Evaluate controls designed to prevent or detect fraud, including

management override of controls;

Evaluate controls over the period-endfinancial reporting process;

Scale the assessment based on the size and complexity of the

company;

Rely on management's work based on factors such as competency,

objectivity, and risk;

Conclude on the adequacy of internal control over financial reporting.

SOX 404 compliance costs represent a tax on inefficiency, encouraging

companies to centralize and automate their financial reporting systems. This

is apparent in the comparative costs of companies with decentralized

operations and systems, versus those with centralized, more efficient

systems. For example, the 2007 Financial Executives International (FEI)

survey indicated average compliance costs for decentralized companies were

$1.9 million, while centralized company costs were $1.3 million. Costs ofevaluating manual control procedures are dramatically reduced through

automation.

V. SarbanesOxley 404 and smaller public companies

The cost of complying with SOX 404 impacts smaller companies

disproportionately, as there is a significant fixed cost involved in completing

the assessment. For example, during 2004 U.S. companies with revenues

exceeding $5 billion spent 0.06% of revenue on SOX compliance, while

companies with less than $100 million in revenue spent 2.55%.

VI. SarbanesOxley Section 802: Criminal penalties for

influencing US Agency investigation/proper administration

Whoever knowingly alters, destroys, mutilates, conceals, covers up,

falsifies, or makes a false entry in any record, document, or tangible object
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with the intent to impede, obstruct, or influence the investigation or proper

administration of any matter within the jurisdiction of any department or

agency of the United States or any case filed under title 11, or in relation to

or contemplation of any such matter or case, shall be fined under this title,

imprisoned not more than 20 years, or both.

VII. SarbanesOxley Section 906: Criminal Penalties for

CEO/CFO financial statement certification

Section 906 states: Failure of corporate officers to certify financial reports

(a) Certification of Periodic Financial Reports. Each periodic report

containing financial statements filed by an issuer with the Securities Exchange

Commission pursuant to section 13(a) or 15(d) of the Securities Exchange Act

of 1934 (15 U.S.C. 78m (a) or 78o (d)) shall be accompanied by Section

802(a) of the SOX a written statement by the chief executive officer and chief

financial officer (or equivalent thereof) of the issuer.

(b) Content The statement required under subsection (a) shall certify that

the periodic report containing the financial statements fully complies with the

requirements of section 13(a) or 15(d) of the Securities Exchange Act of [1]

1934 (15 U.S.C. 78m or 78o (d)) and that information contained in the periodic

report fairly presents, in all material respects, the financial condition and

results of operations of the issuer.

(c) Criminal Penalties.Whoever(1) certifies any statement as set forth in

subsections (a) and (b) of this section knowing that the periodic report

accompanying the statement does not comport with all the requirements set

forth in this section shall be fined not more than $1,000,000 or imprisoned not

more than 10 years, or both; or

(2) Will fully certifies any statement as set forth in subsections (a) and (b) of

this section knowing that the periodic report accompanying the statement

does not comport with all the requirements set forth in this section shall be

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fined not more than $5,000,000, or imprisoned not more than 20 years, or

both.

VIII. SarbanesOxley Section 1107: Criminal penalties for

retaliation against whistleblowers

Section 1107 of the SOX18 U.S.C. 1513(e) states

Whoever knowingly, with the intent to retaliate, takes any action harmful

to any person, including interference with the lawful employment or

livelihood of any person, for providing to a law enforcement officer any

truthful information relating to the commission or possible commission ofany federal offense, shall be fined under this title, imprisoned not more

than 10 years, or both

6. Clawbacks of executive compensation for misconduct

One of the highlights of the law was a provision that allowed the SEC

to force a company's CEO or CFO to disgorge any executive compensation

(such as bonus pay or proceeds from stock sales) earned within a year of

misconduct that results in an earnings restatement. However, according to

Gretchen Morgenson of The New York Times,such clawbacks have actually

been rare, due in part to the requirement that the misconduct must be either

deliberate or reckless. The SEC did not attempt to claw back any executive

compensation until 2007, and as of December 2013 had only brought 31

cases, 13 of which were begun after 2010. However, according to Dan

Whalen of the accounting research firm Audit Analytics, the threat of

clawbacks, and the time-consuming litigation associated with them has forced

companies to tighten their financial reporting standards.

7. Legal challenges

A lawsuit (Free Enterprise Fund v. Public Company Accounting

Oversight Board) was filed in 2006 challenging the constitutionality of thePCAOB. The complaint argues that because the PCAOB has regulatory
http://en.wikipedia.org/wiki/Title_18_of_the_United_States_Codehttp://www.law.cornell.edu/uscode/18/1513.html#ehttp://en.wikipedia.org/wiki/Disgorgement_%28law%29http://en.wikipedia.org/wiki/Gretchen_Morgensonhttp://en.wikipedia.org/wiki/The_New_York_Timeshttp://en.wikipedia.org/wiki/The_New_York_Timeshttp://en.wikipedia.org/wiki/Free_Enterprise_Fund_v._Public_Company_Accounting_Oversight_Boardhttp://en.wikipedia.org/wiki/Free_Enterprise_Fund_v._Public_Company_Accounting_Oversight_Boardhttp://en.wikipedia.org/wiki/Free_Enterprise_Fund_v._Public_Company_Accounting_Oversight_Boardhttp://en.wikipedia.org/wiki/Free_Enterprise_Fund_v._Public_Company_Accounting_Oversight_Boardhttp://en.wikipedia.org/wiki/Free_Enterprise_Fund_v._Public_Company_Accounting_Oversight_Boardhttp://en.wikipedia.org/wiki/Free_Enterprise_Fund_v._Public_Company_Accounting_Oversight_Boardhttp://en.wikipedia.org/wiki/The_New_York_Timeshttp://en.wikipedia.org/wiki/Gretchen_Morgensonhttp://en.wikipedia.org/wiki/Disgorgement_%28law%29http://www.law.cornell.edu/uscode/18/1513.html#ehttp://en.wikipedia.org/wiki/Title_18_of_the_United_States_Code

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powers over the accounting industry, its officers should be appointed by the

President, rather than the SEC. Further, because the law lacks a "severability

clause," if part of the law is judged unconstitutional, so is the remainder. If the

plaintiff prevails, the U.S. Congress may have to devise a different method of

officer appointment. Further, the other parts of the law may be open to

revision. The lawsuit was dismissed from a District Court; the decision was

upheld by the Court of Appeals on August 22, 2008. Judge Kavanaugh, in his

dissent, argued strongly against the constitutionality of the law. On May 18,

2009, the United States Supreme Court agreed to hear this case. On

December 7, 2009, it heard the oral arguments. On June 28, 2010, the United

States Supreme Court unanimously turned away a broad challenge to the law,

but ruled 54 that a section related to appointments violates the Constitution's

separation of powers mandate. The act remains "fully operative as a law"

pending a process correction.

8. Similar laws in other countries

Keeping the Promise for a Strong Economy Act (Budget Measures),

2002 Ontario, Canada, equivalent of SarbanesOxley Act J-SOX Japanese equivalent of SarbanesOxley Act

German Corporate Governance Code (at the German Wikipedia)

nl:code-Tabaksblat Dutch version, based on 'comply or explain' (at

the Dutch Wikipedia)

CLERP9 Australian corporate reporting and disclosure law

Financial Security Law of France ("Loi sur la Scurit Financire")

French equivalent of SarbanesOxley Act

L262/2005 ("Disposizioni per la tutela del risparmio e la disciplina dei

mercati finanziari") Italian equivalent of SarbanesOxley Act for

financial services institutions

King Report on Corporate Governance South African corporate

governance code

Clause 49 Indian equivalent of SOX

TC-SOX 11 Turkish equivalent of SOX
http://en.wikipedia.org/wiki/Keeping_the_Promise_for_a_Strong_Economy_Act_%28Budget_Measures%29,_2002http://en.wikipedia.org/wiki/Keeping_the_Promise_for_a_Strong_Economy_Act_%28Budget_Measures%29,_2002http://en.wikipedia.org/wiki/Keeping_the_Promise_for_a_Strong_Economy_Act_%28Budget_Measures%29,_2002http://en.wikipedia.org/wiki/Keeping_the_Promise_for_a_Strong_Economy_Act_%28Budget_Measures%29,_2002http://en.wikipedia.org/wiki/J-SOXhttp://de.wikipedia.org/wiki/Deutscher_Corporate_Governance_Kodexhttp://nl.wikipedia.org/wiki/code-Tabaksblathttp://en.wikipedia.org/wiki/Corporate_Law_Economic_Reform_Program_Act_2004http://en.wikipedia.org/wiki/Financial_Security_Law_of_Francehttp://en.wikipedia.org/w/index.php?title=L262/2005&action=edit&redlink=1http://en.wikipedia.org/wiki/King_Report_on_Corporate_Governancehttp://en.wikipedia.org/wiki/Clause_49http://en.wikipedia.org/w/index.php?title=TC-SOX_11&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=TC-SOX_11&action=edit&redlink=1http://en.wikipedia.org/wiki/Clause_49http://en.wikipedia.org/wiki/King_Report_on_Corporate_Governancehttp://en.wikipedia.org/w/index.php?title=L262/2005&action=edit&redlink=1http://en.wikipedia.org/wiki/Financial_Security_Law_of_Francehttp://en.wikipedia.org/wiki/Corporate_Law_Economic_Reform_Program_Act_2004http://nl.wikipedia.org/wiki/code-Tabaksblathttp://de.wikipedia.org/wiki/Deutscher_Corporate_Governance_Kodexhttp://en.wikipedia.org/wiki/J-SOXhttp://en.wikipedia.org/wiki/Keeping_the_Promise_for_a_Strong_Economy_Act_%28Budget_Measures%29,_2002http://en.wikipedia.org/wiki/Keeping_the_Promise_for_a_Strong_Economy_Act_%28Budget_Measures%29,_2002

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CONCLUSION

If history teaches us anything, it is that patterns repeat. The cycle of

scandal, reaction and fallout is all too familiar. But events even

cataclysmic oneslead to change, often for the better.

For our entire system of corporate governance to improve, boards of

directors and their audit committees must be among the chief

architects of reform in their dual role as protector of shareholder

interests and trusted adviser to management. It is a pivotal role,

coming at a time when investors are seeking a clear voice of

representation.

Board and audit committee members will need to focus more of their

attention on appropriate checks and balances. They will have to take a

hard look at their composition. Members must ensure that

management is creating and sustaining value, even while they are

being more proactive in challenging managements assumptions and

recommendations. Independent oversight of corporate reporting is a

core element of this reform. To that end, we urge board and audit

committee members to assert their oversight roles.

Vigilance is not an optionit is a must.Sarbanes-Oxley legislation and

proposed reforms by the major U.S. securities exchanges and

associations demand meaningful responses. Inherent in them

movement toward reform is not only the need to comply, but also theopportunity to achieve a greater level of effectiveness.

As linked members of the Corporate Reporting Supply Chain, boards

and their audit committees have a unique opportunity to oversee the

reliability of corporate information. Consistently applying the principles

of transparency, accountability and integrity to corporate reporting will

provide solid evidence of a commitment to reform, as corporations andother institutions seek to rebuild a relationship of trust with the public.

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BIBLIOGRAPHY

Corporate Governance and the Board What Works Best [Publicationdate: 2000]

Advises directors on what the board needs to do, and how best to do it inorder to deliver shareholder value. This document focuses on best practicesand includesa self-assessment guide.

www.pwcglobal.com/corporategovernance

Sarbanes-Oxley and SEC Rules

Text of the Sarbanes- Oxley Act and related SEC rules and proposed rules,with PwC commentary.

www.pwcglobal.com/sarbanes-oxley

The Sarbanes-Oxley Act of 2002: Strategies for Meeting New InternalControl Reporting Challenges

A PwC white paper, this document presents leading strategies and actions tohelp management understand and comply with new internal control reportingchallenges.

www.cfodirect.com/s-owhitepaper

A Mckinsey & Company study: America's financial sector is losingmarket share to other financial centers worldwide

A Mckinsey & Company study commissioned by NYC Mayor MichaelBloomberg and U.S. Sen. Charles Schumer, (D-N.Y.), cites this as onereason America's financial sector is losing market share to other financialcenters worldwide. Referencehttp://www.senate.gov/~schumer/SchumerWebsite/pressroom/special_reports

/2007/NY_REPORT%20_FINAL.pdf

SarbanesOxley Act of 2002 Five Years On: What Have We Learned?

Shakespeare, Catharine (2008). "SarbanesOxley Act of 2002 Five Years On:What Have We Learned?". Journal of Business & Technology Law: 333.
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Documents

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