the Sarbanes-Oxley Act. What consequences have American companies identified after implementation of Section 404 of the Sarbanes-Oxley Act?
Background and Problem: A consequence of the many accounting scandals was that congress passed the Sarbanes-Oxley Act in July 2002. This in order to restore public confidence in the stock market and increase confidence in the integrity of the entire system of public ownership and accountability in the U.S. The legislation establishes new and enhanced standards for all U.S. public company boards and management, and for the accounting profession. One of the Sections in the Act (Section 404) is Management assessment of internal controls. I found it of great interest to investigate what consequences American companies have identified after implementation of Section 404 of the Sarbanes-Oxley Act. Purpose: With this research, my purpose is to explain and analyze the consequences Section 404 of the Sarbanes-Oxley Act has had on American companies. By looking at earlier research on the subject and questioning people who have a great deal of experience and knowledge in the relevant area, this is to be accomplished. Delimitations: My focus is mainly on section 404 of the Sarbanes-Oxley Act- Management Assessment of Internal Controls. In addition, the legislation only affects companies that you can find on American exchanges and their subsidiaries, so this thesis will focus on a few of these companies in the U.S. Methodology: This thesis is based on scientific books and articles as well as survey’s that was send to people who have a lot of knowledge and experience on the subject. This thesis follows a hermeneutic approach and is both descriptive and explanatory. In addition, the qualitative method is most appropriate for this thesis. Analysis and Conclusion: Section 404 of the Sarbanes-Oxley Act has caused both positive and negative consequences. The costs of implementing Section 404 became so much higher than were initially predicted and various other problems have also been identified. But most important, nearly all people think that SOX has succeeded to reach its goal; to restore investor confidence and transparency in financial reporting. Suggestions for further research: My focus in this thesis has been from an American company’s perspective. Thus, it would be very interesting to investigate how auditors, on the other hand, have been affected by the implementation of Section 404 of the Sarbanes-Oxley Act.