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Paul Sarbanes: SOX Living up to its promise

Paul Sarbanes: SOX Living up to its promise

by Rick Turoczy on April 8, 2006

The Public Company Accounting Reform and Investor Protection Act — which today is known as Sarbanes-Oxley — came in direct response to a crisis whose dimensions it is all too easy, in retrospect, to play down.

According to a Wall Street Journal editorial, “The mad rush to pass Sarbox in 2002 was less about keeping business honest than it was about keeping congressmen in office.” This is an affront to the hard work and common sense of the members of Congress who voted for the law, as virtually all did.

A lawsuit asserts that the formation and operation of the Public Company Accounting Oversight Board is unconstitutional. The board’s structure was reviewed by the American Law Division of the Congressional Research Service of the Library of Congress and several distinguished professors of constitutional law, and all approved of the structure under relevant constitutional provisions. A recent detailed analysis by the American Law Division of the suit’s allegations affirms that earlier finding.

Much of the criticism of the statute has been directed to the two short paragraphs that constitute Section 404. One requires all public companies to have a system of internal controls. The other requires that the system of internal controls be attested to. The internal-controls requirement is hardly new to Sarbanes-Oxley. It was established by the 1977 Foreign Corrupt Practices Act, and the language is virtually identical to provisions in the Federal Deposit Insurance Corporation Improvement Act of 1991.

Paul Sarbanes: SOX Living up to its promise

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