Incidents Which Led to the Enactment of the Sarbanes-Oxley Act Research Paper

Incidents Which Led to the Enactment of the Sarbanes-Oxley Act - Research Paper Example This paper declares that corporation was involved in an elaborate scam and financial machinations, such as exaggerating the positive financial statements, performing transactions through the shady dealings, omissions and misrepresentations; and insider trading. In spite of the possible prevention of complete collapse, the Enron’s officers continued to hide the financial problems of the company. The Act is comprised of key provisions that describe the specific requirements, mandatory for preparing financial reports. This report makes a conclusion that the Enron’s scandal is considered to be a crucial moment in the history of the American economics and business, which has led to the enactment of the Sarbanes-Oxley Act in 2002. Relying on the â€Å"advanced experience of financial frauds†, American government developed the Sarbanes-Oxley Act addressing to the main pitfalls discovered during the whole â€Å"pleiads† of financial frauds and bankruptcies. Even though the SOX is recognized to be a major improvement to corporate governance, it still has significant constraints. Experts tend to criticize this Act, concluding that new provisions are not flexible and hardly achievable in real situations. Obviously, just enacting regulations and legal restrictions are not enough to prevent and deter financial reporting frauds. Probably such acts do not provide expected results, because human nature still lacks ethical educational and strong moral principles.