WILL SOX PREVENT ANOTHER ENRON

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This paper looks at the Sarbanes Oxley Act and how will it stop another corporation from failing. In the midst of the failures such as Enron, WorldCom, and HIH just to name a few, there has been a lot of talk and figure pointing on what went wrong? Is the Sarbanes Oxley Act the solution to these ever raising problems?

This paper provides an overview of the SOX, which has been the most far-reaching set of legislative rules enforced since the SEC Act in the USA. The SOX has had its fair deal of benefit and problems. This paper only examines the issue of the can SOX prevent or minimise corporate failures. I will briefly touch on the requirements and the cost and benefit of the SOX.

The auditing profession including the standard setters and the legislators has had a wakeup call after the collapses of some of the most notable corporate failures such as Enron and WorldCom in the US, and HIH Insurance in Australia just to name a few. In case of the local economy, the government-owned National Bank of Fiji (NBF) nearly collapsed in the mid-1990s, which was largely due to poor supervision and poor corporate governance but also due undetected fraud. The list continues but what comes to mind is who is to be blamed for these failures. Is it the Auditing and Accounting Profession, the government, the Stock Markets, the Investors, the Management or we the general public?

INTRODUCTION

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The recent economic surroundings in which businesses operate have changed significantly in the past decade [1] . These changes have been caused partly by advancements in information and production technologies, globalization of production, marketing and not forgetting the corporate failures that have plagued these economies. A "new economy" now exists that is service oriented and information driven. [2] 

The audit firms have a longstanding tradition of continuously innovating the audit approach so that efficient and effective audits are possible in an ever-changing business environment. In the late 1990s the financial risk analysis was modified to give greater consideration to new methods of auditing such as the strategic or business risks facing the client's organization. The call was even strengthen and highly recommended after the recent corporate scandals and audit failures which have diminished confidence in financial statements, increasing the cost of capital and suppressing stock prices. This has also raised concerns over the independence and the validity of these financial reports including its relevance and reliability.

Agency theory indicates that auditees are sensitive to perceptions of auditor independence and thus are motivated to avoid conflict of interest or bias. One way they achieve this is through managing levels of economic bonding between the auditor and themselves through controlling purchases of non-audit services from their auditor [3] 

The level of conflict of interest that exists there in the really world is far more than regulators have suspected. A very key characteristic of an audit or assurance service provider is for the auditor to add credibility to financial report or other subject matter and needs to remain independent, meeting the fundamental ethical requirements. The test for independence is reasonable person test - would a reasonable person having access to all facts consider that the auditor was independent? The emphasis here is on both the perceived independence - how others will view the auditor; and actual independence - state of mind of the auditor. Can the auditor actually eliminate bias and personal interest from their decisions, and not succumb to any pressures or influences? [4] 

After the recent collapses of renowned companies such as Enron [i] , WorldCom [ii] , HIH and others the independence of Auditors, Board of Directors, and the accounting profession as a whole are being questioned. The question that comes mind is; are the Auditors, Board of Directors and even the management of the companies honest, and reliable? Are the published reports reliable and can they be used to make economical and business decisions? Who is to blame for such unethical behaviour?

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As quoted by Williams (2002), "the Enron model is in tatters as America; from the White house to Wall Street tried to work out how it all went wrong. The corporate sector is struggling to sustain investor confidence in the very machinery of American capitalism as scrutiny falls on board of directors, audit committees, the accounting industry, regulators and the law makers themselves. One truism remains: Enron's role as a poster child for the new paradigm. Negligence, slippery numbers, fictitious income statements, insider dealings, conflicts of interest - these are the new bywords for the corporate America. As Arthur Andersen went trial, the honesty and reliability of Corporate America was in the dock too." [5] 

Williams further states "that the excesses of giant corporate payouts, old-boy networks and cross-directorships, insider share sales and duplicitous earnings have left investors reeling. ...The question hanging in the air is whether anyone can be trusted with other people's money anymore." [6] 

Background on Enron and World Com

Enron was founded as a pipeline company in Houston in 1985. Enron was initially involved in transmitting and distributing electricity and natural gas throughout the United States. The company developed, built, and operated power plants and pipelines while dealing with rules of law and other infrastructures worldwide. Enron owned a large network of natural gas pipelines which stretched ocean to ocean and border to border including Northern Natural Gas, Florida Gas Transwestern Pipeline Company and a partnership in Northern Border Pipeline from Canada [7] .

Before its bankruptcy in late 2001, Enron had about 22,000 staff and was one of the most renowned electricity, natural gas, communications, and pulp and paper companies. It had almost more that $101 billion revenue in 2000. Fortune [iii] named Enron "America's Most Innovative Company" for six consecutive years. At the end of 2001 it was revealed that its reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud, known as the "Enron scandal". [8] 

Enron's business included many long term risky investments that had no short term revenues, which lead the company to create special purpose entities (SPE's) to spread the risk of these investments. Although this spread of risk was in itself not illegal, the way the SPE's were created and ultimately managed was. To create these illegal SPE's, Enron used the 3% rule (EITF 90-15), which states that 3% of subsidiary's startup capital must come from an outside investor; Enron actually received this outside investment from managers in Enron or their wives [9] .

Enron filed for bankruptcy protection in the Southern District of New York in late 2001 and selected Weil, Gotshal & Mangers as its bankruptcy counsel. It emerged from bankruptcy in November 2004, pursuant to a court-approved plan of reorganization, after one of the biggest and most complex bankruptcy cases in U.S. history [10] .

Following the disappointment of Enron, came another downtime in the American Economy, WorldCom failed. WorldCom, Inc. perpetrated the largest accounting fraud in U.S. history. The roots of WorldCom go to the Long Distance Discount Services, Inc. (LDDS) which began in Mississippi in 1983. The company went public in 1989 through a merger with Advantage Companies Inc. The company name was changed to LDDS WorldCom in 1995, and later just WorldCom. [11] The company's growth was fuelled primarily through acquisitions during 1990s and reached its apex with the acquisition of MCI in 1998. [12] 

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WorldCom, now called MCI, emerged from bankruptcy protection on April 20, 2004 after being fined $750 million. In total, WorldCom reported accounting irregularities of $11 billion. While employees and investors look for individual culpability, much of WorldCom's organizational structure and culture potentially contributed not only to the fraud but also to the length of time over which it occurred. In many ways, groupthink may help explain some of the issues and fraudulent activities at WorldCom as well as the pressures that were placed on employees extending the period over which the fraud occurred. [13] 

The SEC Report (2003) noted that knowledge of the irregularities was not limited to a few high level executives. Many lower level employees were aware that the accounting entries being posted were not supportable and that the prepared financial reports were false or, at a minimum, very misleading. "Remarkably, these employees frequently did not raise any objections despite their awareness or suspicions that the accounting was wrong, and simply followed directions or even enlisted the assistance of others" (SEC, 2003, p. 7). [14] 

What went wrong?

As stated clearly by the lead prosecutor for the department of Justice, in his closing arguments to the jury in the Enron case:

"this is a simple case, ladies and gentlemen. Because it's so simple, I am probably going to end before my allotted time. It's black and white. Truth and lies! The shareholders, ladies and gentlemen,... buy a share of stock, and for that they're entitled to the truth. They're entitled for the officers and employees of the company to put their interests ahead their own. They're entitled to be told what the financial condition of the company is. They are entitled to honesty, ladies and gentlemen [15] .

The Powers Committee, a panel charged with investigating Enron's demise, noted the company "failed to achieve a fundamental objective: they did not communicate the essence of the transactions in a sufficiently clear fashion to enable a reader of Enron's financial statements to understand what was going on". In short they were not told enough. Furthermore, the Committee also stated that "Enron's board of directors failed to understand the economic rationale, the consequences and the risks of their companies S.P.E deals." [16] 

Enron's auditor were also been accused of conducting business in an unethical manner in its attempt to retain the loyalty of Enron executives. The laws and SEC regulations allowed firms like Arthur Andersen to provide consulting services to a company and then turn around and provide the audited report about the financial results of these consulting activities [17] ; therefore making an "independent audit" by Arthur Andersen independent in name only. Enron's top level management violated several accounting laws, SPE laws, and bent the accounting rules to satisfy their own desires to profit in the short term, completely ignoring long term repercussions for investors, stockholders, employees and the business itself. When Enron corrected these problems in their financial statements, they restated with a loss of $609 million, Wall Street devalued their equity by $1.2 billion, and less than a month later filed for bankruptcy. [18] As was later discovered, many of Enron's recorded assets and profits were inflated, or even wholly fraudulent and nonexistent. Debts and losses were put into entities formed "offshore" that were not included in the firm's financial statements, and other sophisticated and arcane financial transactions between Enron and related companies were used to take unprofitable entities off the company's books [19] .

The fact that was surprising was that Enron was not paying any income tax on four of its five years. Enron use of mark-to-market accounting and SPE were an accounting game that made the company look as though it was earning far more money than it was. But the I.R.S did not accept mark-to-market accounting, since in the eyes of the I.R.S; Enron was not making any money. [20] 

In the WorldCom case, SEC investigated for accounting practises, disputed customer accounts and commissions on corporate business [21] .

The SEC Report (2003) came to a conclusion; that "Ebbers (CEO) created the pressure that led to the fraud. He demanded the results he had promised, and he appeared to scorn the procedures (and people) that should have been a check on misreporting" (p. 18). Moreover, the SEC Report (2003) concluded that:

"WorldCom's continued success became dependent on Ebbers' ability to manage the internal operations of what was then an immense company, and to do so in an industry-wide downturn. He was spectacularly unsuccessful in this endeavour. He continued to feed Wall Street's expectations of double-digit growth, and he demanded that his subordinates meet those expectations. But he did not provide the leadership or managerial attention that would enable WorldCom to meet those expectations legitimately." (p. 5)

SEC report (2003) [22] found that WorldCom's ex-Chief Executive Officer (CEO), Bernie Ebbers, initiated much of the culture and pressure that allowed the fraud to transpire. In concurrence with this finding, on March 2, 2004, Ebbers was charged with conspiracy to commit securities fraud, securities fraud, and falsely filing with the Securities and Exchange Commission (Davidson, 2004; Moritz, 2004 [23] ) after Scott Sullivan, WorldCom's ex-Chief Financial Officer (CFO) agreed to testify against him (Pulliam, Latour, & Brown, 2004 [24] ). In total, Ebbers now faces charges with a maximum penalty of 85 years in prison and an $8.25 million fine (Davidson, 2004). [25] 

The SEC (2003) also found that Scott Sullivan had the misguided reputation among employees for his impeccable integrity. Many of the finance and accounting employees who were aware of the irregularities may have rationalized that because of Sullivan's unquestionable integrity he must have found some new methodology or loophole in the Generally Accepted Accounting Principles (GAAP) to support the entries he was directing. [26] 

Beyond the accounting fraud, both Ebbers and Sullivan engaged in very questionable dealings with their employees. For example, according to the SEC (2003), over an eighteen month period ending in 2002, Ebbers gave Ron Beaumont, WorldCom's ex-Chief Operating Officer (COO), a total of $650,000 whereas Sullivan wrote personal checks to seven of his managers giving them $20,000 each by writing one check to the employee for $10,000 and another to the employee's spouse for the same amount. Sullivan rationalized these payoffs as a company bonus even though they were written on his personal checking account and no additional bonus was authorized by the company's board of directors. The SEC (2003) stated that these acts were "not necessarily improper in themselves ... [they] created conflicting loyalties and disincentives to insist on proper conduct" (p. 23). In addition to these one-time payouts, there were also a select number of employees who were compensated above WorldCom's salary guidelines to promote loyalty to the company (Zekany, Braun, & Warder, 2004 [27] ). [28] 

As we go through the failures, we notice the following:

Falsification of the reports - audits agreed to say that the reports of these firms were true and fair, when there were obvious misrepresentation of the accounting procedures and policies.

Collusion of auditors with the management - Auditors and the management agreed mislead the stakeholders on the dealings and the not disclosure the full information to the public. In the

Auditors providing non audit services to these clients and getting good returns from the NAS - economics literature and the theories of 'knowledge spillovers' state that there are efficiencies to be gained from the joint supply of audit and NAS [29] . Research in this area shows mixed results, but in these instance it seems like to be the case

There was lack / weak of corporate governance practiced by the firms - the financial executives failed in their duty to protect the company assets and provide full disclosure to the shareholders. Also the board of directors and the audit committee failed to protect investor interest(s).

The reports were made to suit the needs of the management, since most of the rewards (pay outs) were linked to performance on the profit and loss basis - the executives used aggressive earnings standards that hardly anyone understood. The executives continued to show good profit despite them not doing well

The use of Accounting irregularities and cooking the books - for instance Enron used Mark to Market accounting. This is used by companies that engage in complicated financial trading. Here what was happening, Enron used to estimate how much of revenue the deal was going to bring in and put these in the financial reports as soon as the contract is signed. Also in Enron the company was using the Special purpose entities (S.P.E). An SPE worked like a separate entity so that the company could show growth and also get more loans from the bank. In WorldCom's situation, the expenses were understated by 3.8billion dollars and when the Auditors were called in they also failed to find the error.

Business ethics were weak - the executives were ethically corrupt and their intentions were to fully their pockets and not in the interest of the shareholders, especially in the case of Enron

The financial markets in the US were wondering what went wrong after the collapse of Enron & WorldCom. The simple reason was that there was a corporate governance failure and that there was lack of honesty in today's world. So to counter these problems the U.S Congress passed the Sarbanes Oxley Act in 2002.

What was the Reaction?

Following the collapse of large companies, investors can readily identify their home grown scandals in nearly every market around the world; a variety of stock manipulations and scandals that have caused values to plummet in recent years on the growing stock markets of China, USA and others. Grynberg et al (2002:113) argues that state ownership of commercial assets with weak systems of public fiscal governance was a recipe for precisely the type of disastrous outcomes that were observed both in terms of absolute dollar values involved and the number of people adversely affected. Interestingly, these corporate scandals have reaffirmed that even the most developed markets are not free from failures in the system. Public and government responses ushered in a new era of higher corporate governance standards, and in some markets, new laws and regulatory requirements are (re)shaping the governance structure. In the U.S., for example, Congress passed the Sarbanes-Oxley Act of 2002 [iv] to restore public trust in the financial markets. The New York Stock Exchange and the NASDAQ Market also adopted higher standards for board independence [30] .

The Sarbanes-Oxley Act of 2002, was created months after Enron Corp., WorldCom and several other companies that were hauled up for accounting fraud in the US, created some of the most stringent financial disclosure norms for public listed companies in the country, including holding a company's senior executives legally responsible for the veracity of their financial statements. [31] When President Bush signed the Act into law, he characterized it as "the most far-reaching reform of

American business practices since the time of Franklin Delano Roosevelt." [32] 

The Sarbanes-Oxley Act of 2002 is a 66-page collection of requirements, many left for real definition by the SEC, designed to highlight and eliminate what its proponents have settled on as the root causes of the financial debacles. But broadly, with some frankly disturbing exceptions, the Act simply makes

Federal law out of existing financial regulatory regimes and practices, and either creates or increases existing criminal penalties for white collar crimes. [33] 

The Sarbanes Oxley Act of 2002 severely affects the accounting profession and provides more rigorous independence requirements and more ruthless penalties for breaches. The major provisions of the Act are the establishment of the Public Company Accounting Oversight Board (PCAOB), prohibition of auditors from performing certain non-audit services [v] (provisions are contained in Sections 201 and 202 of Title II) for their audit clients, imposition of greater criminal penalties for corporate fraud, mandates audits partner rotation and strengthens the role of the audit committee and call for more detailed and timely disclosure of financial information. [34] 

Further, Section 404 of the Act requires that management assess internal controls and that auditor's report on the internal controls of their clients. By requiring deeper oversight, imposing greater penalties for misconduct, and dealing with potential conflicts of interest, the Act aims to prevent deceptive accounting and management misbehaviour.

The Sarbanes Oxley Act 2002 also extends the statute of limitations for the discovery of fraud to two years (previously one year) from the date of discovery and five years after the act (previously three years). The Act establishes unsympathetic penalties for securities law violations, corporate scam and document shredding and requires the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) to officially state that the financial report fairly presents in all material respects the operations and condition of the company. It also requires management to provide a report on the effectiveness of internal control over financial reporting and the auditor t provide assurance that the report is appropriate. [35] 

The SOX affects not only US companies and US Auditors, but any audit firm actively working as a auditor of, or for, a publicly traded US company or its subsidiary. Therefore, the Act covers and Australian audit firm or Pacific audit firm that does the audit of a subsidiary of a US listed company or that of any company listed in the US stock exchange [36] .

Sarbanes-Oxley contains 11 titles that describe specific mandates and requirements for financial reporting. Each title consists of several sections, summarized below. [37] {Note the following section has been adopted from Wikipedia, the he free encyclopedia}

Public Company Accounting Oversight Board (PCAOB) - provides independent oversight of public accounting firms providing audit services. Explains on the audit policies and procedures to used

Auditor Independence - address the issue of conflict of interest and auditor rotation and other services to be provided or not to be provided

Corporate Responsibility - authorizes that senior executives take individual responsibility for the accuracy and completeness of 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 behaviours of corporate officers and describes specific forfeitures of benefits and civil penalties for non-compliance.

Enhanced Financial Disclosures - describes enhanced reporting requirements. Also requires internal controls to be assured for accuracy and requires a audit and report on the internal control systems

Analyst Conflicts of Interest - 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.

Commission Resources and Authority - 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.

Studies and Reports - requires ongoing research and analysis of the reports and new accounting regulations

Corporate and Criminal Fraud Accountability - describes specific criminal penalties for manipulation, destruction or alteration of financial records or other interference with investigations, while providing certain protections for whistle-blowers.

White Collar Crime Penalty Enhancement - increases the criminal penalties associated with white-collar crimes and conspiracies. It recommends stronger sentencing guidelines and specifically adds failure to certify corporate financial reports as a criminal offense.

Corporate Tax Returns - states that the CEO to sign tax returns

Corporate Fraud Accountability - 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 the resort to temporarily freeze transactions or payments that have been deemed "large" or "unusual".

Nothing had shaken the accounting and auditing professions more than the collapse of Enron and the resulting ban from auditing public companies placed on Arthur Anderson, one of the largest and oldest accounting firms around. The signal was clear - the need for change within the professions and throughout the audit function. The Congress in the US reacted by implementing SOX as a preventative approach to another Enron. However, the question still remains: Is SOX the solution?

Will SOX avoid another Enron or WorldCom?

Research into the topic of SOX being the solution, has showed mixed results. This paper will highlight only some of the results shown by researchers over the past few years.

Accordingly to the Wikipedia, the free Encyclopaedia, Former Federal Reserve Chairman, praised the Sarbanes-Oxley Act: "I am surprised that the Sarbanes-Oxley Act, so rapidly developed and enacted, has functioned as well as it has...the act importantly reinforced the principle that shareholders own our corporations and that corporate managers should be working on behalf of shareholders to allocate business resources to their optimum use." [38] 

SOX, has been praised by a cross-section of financial industry experts, citing improved investor confidence and more accurate, reliable financial statements. The CEO and CFO are now required to unequivocally take ownership for their financial statements under Section 302, which was not the case prior to SOX. Further, auditor conflicts of interest have been addressed, by prohibiting auditors from also having lucrative consulting agreements with the firms they audit under Section 201 [39] . SEC Chairman Christopher Cox stated in 2007: "Sarbanes-Oxley helped restore trust in U.S. markets by increasing accountability, speeding up reporting, and making audits more independent." [40] 

The FEI 2007 study and research by the Institute of Internal Auditors (IIA) also indicated SOX has improved investor confidence in financial reporting, a primary objective of the legislation. The IIA study also indicated improvements in board, audit committee, and senior management engagement in financial reporting and improvements in financial controls [41] .

The Wikipedia, the free Encyclopaedia furthermore states, financial restatements increased significantly in the wake of the SOX legislation and have since dramatically declined, as companies "cleaned up" their books. Glass, Lewis & Co. LLC is a San Francisco-based firm that tracks the volume of do-overs by public companies. Its March 2006 report, "Getting It Wrong the First Time," shows 1,295 restatements of financial earnings in 2005 for companies listed on U.S. securities markets, almost twice the number for 2004. "That's about one restatement for every 12 public companies-up from one for every 23 in 2004," says the report. [42] 

On the contrary, SOX has also been cited for weakening investment and potential growth of the American Economy. According to Zhang, the cumulative abnormal return around the legislative events leading to SOX is significantly negative. The abnormal returns are largely insignificant around the events related to the implementation of SOX. The evidence reveals that investors consider the Act to be costly and/or the information conveyed by the passage of the Act to be bad news for business. The loss in market value around the most significant rulemaking events amounts to $1.4 trillion, which likely reflects direct compliance costs, indirect costs and expected costs of future anti-business legislation. The impact of other contemporaneous news announcements is also incorporated into the abnormal return, but a further examination of intraday returns shows that such announcements are unlikely the key driver of the negative returns in July 2002 [43] .

Furthermore Zhang, states that firms' cumulative abnormal returns are decreasing with their purchases of non-audit services and the complexity of their business. These findings suggest that the restriction of non-audit services and the new requirement of the internal control tests are costly. The test of market reactions to the announcement of postponing compliance with Section 404 shows that the postponement is particularly beneficial for small firms. Most significantly, he found that firms with perceived weak governance experience lower abnormal returns around the events that increase the likelihood of passing tough governance rules. The results show that these firms do not benefit from enhanced governance as commonly expected, but actually lose more as a result of SOX. This finding significantly challenges the value of SOX, as it is primarily characterized as legislation "improving" corporate governance and increasing shareholder value. [44] 

Another recent survey of more than 80 US fraud examiners indicate that most believe fraud is more prevalent today than it was in 2002 when SOX was introduced. 75% of the respondents to Oversight Systems most recent Annual study on corporate fraud is prevailed today, compared with two out of three respondents in 2005 survey. Only 3% of respondents felt that fraud was less prevalent. "The first several years of SOX has not been effective (in preventing fraud)". [45] Furthermore, 42% d respondents believe that corporate vigilance around fraud prevention has slackened since SOX. 13% said there was a perception of greater corporate vigilance. Similar results were found in 2007 survey [46] .

The main issues identified in this have been addressed by SOX, however, SOX has failed to address:

The cost of new listing on the stock exchanges. Companies are not wanting to go public as the implementation cost of SOX is high

The impact of the SOX in getting competitive edge for the US firms in comparison to foreign firms.

The implementation has been expensive and most of the firms are reducing other costs in order to maintain the cost of implementing SOX, therefore comprising the future growth of the firms and thus the economic growth of US.

Finally, can we build ethics or ethical behaviour in one individual, society or the group of personnel's managing a company. In my view ethics and ethical behaviour is adopted by the surroundings and the people involved and not by law or legislations such as SOX.

CONCLUSION

The turnaround of the century was greeted by the turmoil of disasters for the financial markets across the global. The global was plagued with corrupt and untrustworthy executives. The financial markets in the US and Australia were wondering what went wrong? The simple reason was that there was a corporate governance failure and that there was lack of honesty in today's world.

In desperation, of these failures the U.S Congress introduced the Sarbanes Oxley Act in 2002. The act was designed to "protect investors by improving the accuracy and reliability of corporate disclosures". The act was able to address the appropriate relationship between the independent auditors and the management of the company being audited, specify appropriate corporate governance practices, stipulate provisions to respect corporate fraud and accountability and finally establish requirements for internal control to ensure proper implementation and documentation of the systems for more integrity and accountability. With the implementation of the Act, it does seem like that it will prevent future failures such as Enron.

On the contrary, while SOX calls for independent directors, splitting the roles of executives, outlawing loan scheme, protecting whistleblowers and making the directors and the audit committees more accountable, but are they enough? The cost of implementation has been high and the provision have already being watered down. Can we teach or build ethics in oneself? The directors, managers and other need to remember is that ethics matter and must be demonstrated from the top; that it is better to market expectations rather than to manage earnings to meet expectations; and that it is false economy to scrimp on information and control systems. None of this will prevent companies pursing flawed strategies or making poor acquisitions. Nor will it rein in the overly ambitious and greedy CEO unless it is a strong, knowledgeable and challenging board.

To conclude SOX does provide for more tougher regulations and more tighter controls for governance and reporting, however, it will fail to build a better society and also will not be able prevent corporate failures. It will solve the problems highlighted by Enron and WorldCom, but it will not solve ethical issues and behaviour of corporate leaders/executives.