Document Type


Publication Date

Winter 2006


The purpose of this paper is to review US corporate governance systems and to highlight the mandated roles of audit committee and external auditor within the SOX Act. In addition, it discusses requirements and implications of the SOX Act for the foreign accounting firms and multinational corporations. Finally this paper provides a perspective on improvement of corporate governance and financial integrity. In order to regain trust from the financial market, the SOX Act mandates (1) to improve auditor’s independence by reducing conflicts of interest; (2) to increase corporate financial reporting responsibility by requiring a CEO or a CFO certify accuracy of annual report; and (3) to enhance financial disclosures. It also significantly increase criminal penalty for non-compliance. The authors believe that the combination of strengthening auditor’s independence, increased corporate responsibility and severe penalty and restored corporate governance would create an environment that is intended by the SOX Act. Volker and Levitt (2004) put it very forceful way: “While there are direct money costs involved in good corporate governance, we believe that an investment in good corporate governance, professional integrity and transparency will pay dividends in the form of investor confidence, more efficient markets and more market participation for years to come.” We concur with them and believe that the SOX Act will help in restoring trust in corporate governance and improve financial integrity and quality of financial information. We also agree that the benefits of the SOX Act will outweigh the costs of compliance in the long-run.


Originally published:

Shim, E. Daniel and M. Massoud. "Corporate Governance, Public Accounting Firm and Multinational Corporation: The US SOX Act Perspective." Corporate Ownership and Control 3.2 (Winter 2005/2006): 159-164.



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