| With the economy in shambles and investors as | | | | honest companies are struggling to survive |
| weary as ever, one might start to wonder if the | | | | between the poor economy and massive costs |
| Sarbanes-Oxley act has really done anything to | | | | to keep their financials fraud-free. |
| prevent fraud. While we have not seen any fraud | | | | Even with Sarbanes-Oxley in effect, there are |
| quite as ugly as the kind that brought down Enron | | | | news reports regularly describing the newest |
| and WorldCom, it is still plentiful. Fraud, it seems, | | | | ponzi scheme unearthed in the financial world. |
| has been slightly deterred at the corporate level, | | | | These are not your average crooks either, these |
| but still runs rampant throughout the financial | | | | are brilliant minds of the financial world detecting |
| industry. These ponzi schemes seem to be | | | | an exploit and taking advantage of it. We only |
| happening more and more, with former chairman | | | | hear about the ones who get caught, but there |
| of NASDAQ Bernie Madeoff being involved in one | | | | are no doubt many who skim constantly and get |
| worth around fifty billion dollars recently. | | | | away with it. With the economy on the fritz, it |
| In the early 2000s, investors and employees of | | | | only increases the motive for fraud. Fund |
| the companies involved were devastated when | | | | managers and financial advisors are on the |
| huge corporate fraud cases emerged. This fraud, | | | | chopping block. They are the ones getting the |
| administered from the highest offices in the | | | | blame for poor performing stocks, and the ones |
| corporations, left investors with worthless shares | | | | with their jobs on the line. With all this added |
| and employees with no job, and depleted | | | | pressure it is obvious why fraud can look like an |
| retirement funds. It was time for reform, and the | | | | easy solution. |
| federal government stepped in. The Public | | | | So now what do we do? More legislation? |
| Company Accounting Reform and Investor | | | | Legislation is not the answer here. Sarbanes-Oxley |
| Protection Act of 2002, or Sarbanes-Oxley, was | | | | proved that legislation could only take us so far. |
| their answer to corporate fraud. SOX was | | | | The answer is ethics. Ethics must be emphasized |
| intended to make these high ranking officials | | | | by businesses instead of profits. If we start |
| responsible for the legitimacy of all financial | | | | leaning towards ethics training and taking a little |
| statements released to the public. It also put | | | | pressure of performance it will slowly turn our |
| measures in place to prevent public accounting | | | | financial ship back in the right direction. Honesty |
| firms from getting too involved in the | | | | should be the number one priority, and profits |
| corporations in which they prepared financial | | | | should be number two. If you only emphasize |
| statements for. | | | | profits and performance, eventually fraud will rear |
| While Sarbanes-Oxley was no doubt a good idea, | | | | its ugly head and the entire company could be at |
| but it turned out to be very costly for companies | | | | stake. If you emphasize ethics and honesty, the |
| trying to implement these new processes in order | | | | profits may not be as substantial but at least you |
| to comply. Now there is a situation where the | | | | know them to be true. This sets the groundwork |
| companies that were responsible for the start of | | | | for a company to prosper for many years as an |
| this fraud panic have folded, and the ones that | | | | ethical honest corporation rather than burn out |
| were honest are paying a stiff penalty. Now these | | | | quickly like a profit driven supernova. |