Business ethics Essay Example | Topics and Well Written Essays - 500 words - 3

Business ethics - Essay Example akes the market becomes inefficient because it makes companies look good not by producing the best product and services at the least cost but by means of misrepresentation. Companies are made to look profitable by financial acrobatics when in fact, they are not making that much. The prevalence of fraud has a grave social implication whch everybody experienced recently. The financial crisis was precipitated by fraudulent companies where investors lost its trust in the market because of frauds. The law intends to make the financial industry objective and ensures that the financial reports that companies release to the general public are accurate and free from fraud and prevent other companies to have undue advantage through fraud such as the case of Enron. This will make the market more efficient because it prevents fraud which distorts the market. The Sarbanes-Oxley Act law intends to remove the possiblity that auditing firms and companies will connive to give the public a false financial report that distorts the operation of a free market. The Sarbanes-Oxley Act would prevent auditing firms such as Arthur Andersen to assumed the role of an Management Consultant as well as Auditor for companies like Enron. When Arthur Anderson became a Consultant for Enron, it became in effect its employee and thus losing its independence thereby conflict of interest inevitably arise which is inimical to the efficient operation of the market. This would be prevented with the Sarbanes-Oxley Act because the law stresses Auditor Independence that establishes the independence of external auditor to limit the conflicts of interest. Conflict of interest leads to losing independence of audit report that lead to their audit certification of a company’s overstated earnings and thereby distorting the market by not reflecting the true financial position of its players. The Sarbanes-Oxley Act also mandates the establishment of a Public Company Accounting Oversight Board which