Sarbanes-Oxley Act SEC 404 the Term Paper

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The implementation of the Sarbanes-Oxley Act section 404 as federal law was a necessary step in order to regain public trust in the financial controls and reporting of companies. Huge corporate scandals, such as the ones affecting Enron, and WorldCom, shook the public to their core, and resulted in the demand for consistent measures that would make companies accountable for all financial operations. This legislation was necessary and useful, but the focus of the law may be off the mark.

Accounting practices may have unfairly received the blame for corporate scandals in recent years. As outlined by Lin and Wu (2006), the aim of the Sarbanes-Oxley Act section 404 is somewhat misguided, and is placing undue attention on accounting as the culprit in the case of these crimes.

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Instead, the focus of measures to improve accuracy and reliability of financial controls and reporting should be directed at management practices. The future success of legislation put forth to improve internal controls of companies requires a shift towards a more detailed assessment of management and not accounting practices (Lin and Wu, 2006).

Furthermore, the unreliable financial statements that were prevalent in recent corporate scandals were a result of fraudulent or neglectful decisions imposed by management (Lin and Wu, 2006). No matter how effective internal controls are assessed by auditors to be, it is the decision of management as to whether they want to manipulate business processes to achieve certain financial objectives, and moreover abuse accounting systems in the process (Lin and Wu, 2006)......

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"Sarbanes-Oxley Act SEC 404 The" (2007, February 06) Retrieved June 4, 2026, from
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