Suggested Improvements of SOX Legislation

One suggestion for improving SOX is to avoid conflicts of interest. SOX already prevents auditing firms from also providing consulting services. This is definitely a step in the right direction since Arthur Andersen was getting more revenue from consulting than from services (Bumgardner, 2003). But other conflicts of interest situations still exist. For instance, there is a problem with the newly created PCAOB. The five board members are not appointed by the President. The SEC does the hiring and firing. This possibly violates the doctrine of separation of powers (Sell Sarbanes, 2008). If the PCAOB is going to be an arm of the government, then it would be better if the President selected the members of the board.

            Another way to improve SOX concerns the five-year rotation of auditors. Currently, SOX requires the rotation of audit partners but they could still all be from the same firm. A better way for rotation would be to require rotation of the entire firm (Kessel, 2011, p.143).

            One area of SOX that has already been improved is protection for Whistleblowers. Whistleblowers are provided incentives and protection by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the SEC Office of the Whistleblower. The law prohibits employers from discriminating against a whistleblower. Whistleblowers can report their claim anonymously. The Dodd-Frank Act expanded the reach of the whistleblower protections provided by SOX to include employees of public companies as well as employees of its private subsidiaries and affiliates.

            Recently, whistleblower legislation has been enhanced. On March 4, 2014, in Lawson v. FMR LLC, the U.S. Supreme Court ruled that this whistleblower protection applies not only to employees of publicly owned companies, but also to employees of privately owned contractors and subcontractors of public companies. The recent legislation on whistle-blowing represents one battle won in the ongoing fight against corporate corruption in the United States. Sarbanes-Oxley revisions like the one proposed in 2012 where Congress was poised to pass legislation that would change Sarbanes-Oxley making it easier for private companies to go public are also a way to improve SOX (Geron, 2012). “The potential legislation, which would enable companies with less than $1 billion in annual revenue to comply with certain SOX regulations after they have had their IPO, has rare bipartisan support in a divided Congress (Geron, 2012).” Finally, more revisions to SOX to help smaller companies confront the costs of SOX compliance should be implemented.

Bumgardner, L. (2003). Reforming corporate America: How does the Sarbanes-Oxley impact      American businesses? Graziadio Business Review. Retrieved from

            http://gbr.pepperdine.edu/2010/08/reforming-corporate-america/

Geron, (2012). Retrieved from

            http://www.forbes.com/sites/tomiogeron/2012/02/24/will-sarbanes-oxley-changes-help-      ipo-market/

Kessel, M. (2011). Sarbanes-Oxley overburdens biotech companies. Nature Biotechnology,

            29(12), 1081-1082.

Sell Sarbanes.(2008). Sell Sarbanes-Oxley: Editorial of The New York Sun. Retrieved from

            http://www.nysun.com/editorials/sell-sarbanes-oxley/84635/

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