After a prolonged period of financial scandals investors experienced, the Sarbanes-Oxley
Act was enacted in 2002. The act streamlined the financial and accounting services of
institutions hence ensured investors' confidence. In the streamlining process, businesses
experienced increased operations costs. The general manager's productivity was highly affected
due to perceived risks and penalties in case of fraudulent activities (Yimam & Fernandez, 2016).
Increased audit fees and corporate advisory services charges significantly reduced the value of
the small business.
The act made the US Capital markets less attractive than foreign markets as these
investors experienced less productive management and lower returns. Due to strict guidelines,
small and upcoming businesses faced difficulties having capital while mergers had the best
opportunities (Blokhin, 2020). The act also ensured full financial disclosure in which was risky
since competitors could use that information to their advantage. Many companies were targeting
to go public, but after the act, many companies especially the smaller ones fear cost associated
with being a public company.
Internal controls are the management set rules or policies that ensure accountability, halt
any fraudulent activity, promote efficiency and safeguard the company's assets. The controls help
effective operations. The first basic principle is having enough staff increase productivity and
reduce overworking. Secondly, staff training with relevant skills decreases the wastage of
resources. Also, the division of roles where the staff is delegated according to their abilities.
Record keeping that has the employee's record, register of stocks. The fifth is the ready books for
internal controls that are up to date. The institution should ensure that there are rotation and
Running head: THE IMPACT OF SARBANES-OXLEY’S ACT 3
division of roles thus avoiding fraud and prolonged errors. Finally control accounts and regular
internal audits that check how accurate the books are.
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Blokhin, A. (2020, January 29). The Impact of the Sarbanes Oxley’s Act of 2002. Retrieved from
Blokhin, A.(2020, January 29). The Sarbanes-Oxley’s and its Effect on Investor Confidence (n
.d). Retrieved from https://publicpolicy.wharton.upenn.edu/live/news/465-the-sarbanes
Yimam, D., & Fernandez, E. B. (2016). A survey of compliance issues in cloud computing.
Journal of internet services and applications, 7(1). doi: 10.1186/s13174-016-0046-8