Why Was sarbanes oxley act 404 Created?_______________________________________Advertisement The sarbanes oxley act 404 act of 2002 has drawn a lot of criticism from many who claim that it places too much power in the hands of the government in regards to their involvement with regulating big business; which is an argument that has been replayed over and over again since business reform in Franklin Roosevelt’s days. It has also garnered much criticism that it is impossible to regulate the securities market with this amount of regulations, because the big businesses are unable to compete internationally with others in the securities market. So why was sarbanes oxley act 404 created? If you remember the early 2000’s you will most likely recall the Enron trial, which you may not have misunderstood, or believed only involved large CEO’s if you were not one of the general public who lost your retirement savings. However, it was not just the Enron scandal that occurred, but the public flouncing of many huge stock corporations including Adelphia, Enron, and many more. The corruption of what these huge companies were doing to the general public even was traced as far back as Martha Stewart. At this point, you are probably still wondering why was sarbanes oxley act 404 created? You have to understand the scandal basis a little better and it will make more sense. For the sake of argument and since it was the most well known scandal, its easiest to describe the Enron scandal and how it contributes to answering why was sarbanes oxley act 404 created. In the Enron trial, many top executives and CEO’s took place in massive hedge trading and insider trading the night before they knew the share market in the securities market was going to drastically lowered. What this means is they sold off or traded off all of their shares to make profit, which resulted in the drastic lowering of the share value even more for all of the general public who held stock in these companies. As a result the general public lost millions of dollars and their 401ks and IRA’s, while the businesses made a profit. This is the answer to why was sarbanes oxley act 404 created. It was created to place strict regulations on corporate businesses, and hold them directly responsible for their financial statement, therefore in the future not allowing businesses to take profit leaving the public to take the fall. It also outlines the punishments that the corporate officers will receive if they step outside of the boundaries to prevent the idea from occurring to CEO’s again and thus the public interest is protected. |