The Sarbanes-Oxley Act of 2002 (often shortened to SOX) is legislation enacted in response to the high-profile Enron and WorldCom financial scandals to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise. The act is administered by the Securities and Exchange Commission (SEC), which sets deadlines for compliance and publishes rules on requirements. Sarbanes-Oxley is not a set of business practices and does not specify how a business should store records; rather, it defines which records are to be stored and for how long (www.searchcio.techtarget.com). The legislation not only affects the financial side of corporations, it also affects the IT departments whose job it is to store a corporation's electronic records. The Sarbanes-Oxley Act states that all business records, including electronic records and electronic messages, must be saved for "not less than five years." The consequences for non-compliance are fines, imprisonment, or both. IT departments are increasingly faced with the challenge of creating and maintaining a corporate records archive in a cost-effective fashion that satisfies the requirements put forth by the legislation (www.searchcio.techtarget.com). The intent of the Sarbanes-Oxley Act was to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes. The Sarbanes-Oxley Act created new standards for corporate accountability as well as new penalties for acts of wrongdoing. It changes how corporate boards and executives must interact with each other and with corporate auditors. It removes the defense of "I wasn't aware of financial issues" from CEOs and CFOs, holding them accountable for the accuracy of financial statements. The Act specifies new financial reporting responsibilities, including adherence to new internal controls and procedures designed to ensure the validity of their financial records (www.sox-online.com). SOX applies to all public companies in the U.S. and international companies that have registered equity or debt securities with the Securities and Exchange Commission and the accounting firms that provide auditing services to them. If a company isn’t in compliance, what happens depends on which section of the act they’re out of compliance with. Noncompliance penalties range from the loss of exchange listing, loss of D&O insurance to multimillion dollar fines and imprisonment. It can result in a lack of investor confidence. A CEO or CFO who submits a wrong certification is subject to a fine up to $1 million and imprisonment for up to ten years. If the wrong certification was submitted "willfully", the fine can be increased up to $5 million and the prison term can be increased up to twenty years (www.sox-online.com). The success of Sarbanes – Oxley is often debated. Those who criticize the Act claim that the Act is unnecessary and too expensive to implement. The most ardent criticizers of the bill claim that not only has Sarbanes – Oxley failed in its mission to ensure honest financial recordkeeping and disclosure but that it has also stifled new business development in the United States. Some criticizers point to the Madoff scandal as an example of the failure of the Sarbanes – Oxley Act. Yet, not all analysts share in this type of criticism. Many analysts believe that more precise financial statements are now being prepared for public companies and that shareholders have greater confidence in their investments as a result of Sarbanes – Oxley. In order for these benefits to be realized, however, the S.E.C. must ensure that all of the requirements of the Act are carefully and universally followed and that exceptions, such as those for certain accounting firms, are not permitted (LawInfo, 2009). Even with Sarbanes-Oxley in effect, there are news reports regularly describing the newest ponzi scheme unearthed in the financial world. These are not your average crooks either, these are brilliant minds of the financial world detecting an exploit and taking advantage of it. We only hear about the ones who get caught, but there are no doubt many who skim constantly and get away with it. With the economy on the fritz, it only increases the motive for fraud. So now what do we do? More legislation? Legislation is not the answer here. Sarbanes-Oxley proved that legislation could only take us so far. The answer is ethics. Ethics must be emphasized by businesses instead of profits. If we start leaning towards ethics training and taking a little pressure of performance it will slowly turn our financial ship back in the right direction. Honesty should be the number one priority, and profits should be number two. If you only emphasize profits and performance, eventually fraud will rear its ugly head and the entire company could be at stake. If you emphasize ethics and honesty, the profits may not be as substantial but at least you know them to be true. This sets the groundwork for a company to prosper for many years as an ethical honest corporation rather than burn out quickly like a profit driven supernova (Fuller, Greg). Many of the Sarbanes-Oxley requirements directly affect the accounting and auditing industry. Sarbanes-Oxley establishes accounting and auditing standards through oversight by the newly created Public Company Accounting Oversight Board (PCAOB). Public auditing firms must now register with the PCAOB, pay annual fees, and are subject to quality reviews by the PCAOB on an annual basis if the firm conducts more than 10 audits a year. If a firm conducts less than five public audits a year and has fewer than 10 partners, the PCAOB will conduct reviews at least every three years, unless the PCAOB orders a special inspection of a firm. In addition, the firms must adopt quality control standards. The SEC is still deciding whether private auditing firms are subject to Sarbanes-Oxley (Rolf, Carol A.). The Sarbanes-Oxley Act charges the Board with overseeing the audits of public companies, protecting the interests of investors, and furthering the public interest in the preparation of informative, accurate, and independent audit reports. Under the Sarbanes-Oxley Act, the Board’s impact on auditing firms and the public accounting profession includes -- registering accounting firms, inspecting registered firms, establishing auditing standards, and conducting investigations and disciplinary proceedings Other impacts include first, cross-border auditing, also called the internationalization of auditing, where the Board’s responsibilities are not limited to U.S.-based auditors. Second, the inspection program, where the audit firm inspection program will be of interest to public companies and their advisors. A third impact is standard setting, in which Board decisions will directly affect public companies is auditing standards. And lastly the role of the Audit Committee, where the Board becomes a new factor in the debate concerning the role of the audit committee (www.pcaobus.org). I believe that the accounting profession is better off being government regulated, because the government is there to ensure that regulation is achieving the public interest. Self-regulation lacks credibility, while the government understands the nature and characteristics of the accounting profession regulating and has systems in place for monitoring and regulation. Government Regulation is also necessary in the coordination of economic activity. I believe that corporate fraud will remain the same or slowly decrease. Due to the number of provisions add to strengthen disclosure requirements placed on public companies, and the stricter criminal penalties. I feel that in the long run, the benefits and advantages of the Sarbanes-Oxley Act will prove to be effective and outweigh the short-term challenges and disadvantages.