There is a great deal of fraudulent activity taking place these days, mostly in response to the tough economic times the nation is facing. Many companies, instead of using Sarbanes-Oxley, have done little to try and prevent fraud.
The whole purpose of creating the Sarbanes-Oxley (SO) regulations was to help restore the faith in executives and companies snared in the middle of fraud scandals. The most famous of those fiascos include Enron and Tyco. “Was SO the effective tool it was originally envisioned to be? Judging by the statistics showcasing how much fraud is going on right now, the answer would be a resounding “No.” Unfortunately, many companies have complacently done just about nothing to actively try and prevent fraud from happening,” outlined Seth Wilburn, of the The Gomez Firm, a Dallas employment lawyer and Dallas business lawyer.
While the provisions of SO were well intentioned, it appears their impact has been short rather than long-term. “The idea was to alleviate the kind of panic that was running rampant when it was discovered that public companies were defrauding the public. Put another way, although SO appears to be effective on paper, it seems to be less so in actual practice,” said Wilburn. It doesn’t deter fraud mainly because it only demands a detailed outline of whatever accounting procedures a company has taken.
At this point, hundreds of companies are putting the SO regulations in place, at an enormous expense, which is passed down to the customers. However, it’s not solving the underlying problem of those who choose to commit fraud to line their pockets.
“Make no mistake about it, SO is not a useless exercise. It only takes a small amount of creativity to extend the usefulness of the paper trail to make it into a system capable of flagging suspected fraud or at least highlighting problem areas for investigation,” added Wilburn. Many companies have, in fact, enhanced their paper trail internal controls to take SO several steps further than the legislation actually calls for, implementing formal accounting procedures that virtually guarantee no one will be able to commit fraud.
“There are however those who will always slip through the net; those whose ‘intent’ is to rip a company off no matter what type of controls are in place. To some, it’s a game of challenges to achieve the high of getting money illegally. The bottom line here is that ethics are at the center of this controversy, and if those in power don’t have ethics, fraud will continue to happen,” added Seth Wilburn of the The Gomez Firm, a Dallas employment lawyer and Dallas business lawyer.
The Gomez Firm is a Dallas employment lawyer and Dallas business lawyer. To learn more, visit http://www.gomezlawyers.com.