Implementation of the Oxley-Sarbanes Act - Essay Example

The “dot-com” boom was underway with some economists predicting that the traditional business cycle was dead. Then the bubble popped, exposing the market’s susceptibility to over-exuberance and a plethora of dishonest business practices that were masked by the prosperity being enjoyed in all sectors of the economy. Company names like Enron, WorldCom, Adelphia, and Tyco became synonymous with greed, corruption, and dishonesty. The conflicts of interest in these firms between analysts, lawyers, accountants, and executives were too numerous to count.

Added to these gross improprieties was a change in corporate culture that emphasized short-term gains, obsessing over earning from quarter to quarter, instead of devoting talent and efforts towards long-term sustainable growth (Donaldson, 2003). The Sarbanes-Oxley Act has greatly affected how CFO’s and CEOs handle financial statements. CEOs and CFOs must certify in each periodic report containing financial statements that the report fully complies with relevant sections of the Securities Exchange Act of 1934 and that the information truly shows the company’s financial condition.

They also must produce financial statement updates at the bidding of the Securities and Exchange Commission if they deem this action to be necessary for the public good. Attached to these new rules for CEOs and CFO’s are also stiff, mandatory sentencing and monetary damage guidelines for executives that willfully neglect to adhere to the new rules in the Sarbanes-Oxley Act.