The Sarbanes-Oxley Act: Federalizing Norms for Officer, Lawyer and Accountant Behavior

57 Pages Posted: 12 Feb 2003

See all articles by Larry Catá Backer

Larry Catá Backer

Pennsylvania State University, Penn State Law

Abstract

In response to a number of corporate scandals, the federal government enacted the Sarbanes-Oxley Act of 2002. The Act creates a framework for the oversight of the accounting profession and its practices by the government, imposes a number of certification requirements on corporate officers, restricts a number of corporate practices involving trading of securities by and loans to corporate officers, imposes reporting duties on lawyers, and provides protection for employees who disclose violations of law by corporate officers or directors. This paper explores some of the changes made by the Act in a practice context by discussing the way the Act might affect behavior in a number of business situations: people considering the offer of a position as a corporate officer; accounting firms seeking to perform audit and other functions for a corporate client; restrictions of loans to officers, including advances of fees pursuant to indemnification agreements; the adoption of financial codes of ethics; obligations of lawyers to report evidence of wrongdoing; the obligations of management to implement internal accounting and disclosure systems and to disclose wrongdoing; and protections for employees reporting wrongdoing; the new criminal penalties for wrongdoing by corporate insiders. The relationship of the provisions of the Act to state corporate law and the Act's inconsistencies, traps for the unwary and unanswered questions are also explored.

JEL Classification: K22, K44, M49

Suggested Citation

Backer, Larry Catá, The Sarbanes-Oxley Act: Federalizing Norms for Officer, Lawyer and Accountant Behavior. St. Johns Law Review, Vol. 76, pp. 897-952, 2002. Available at SSRN: https://ssrn.com/abstract=347241 or http://dx.doi.org/10.2139/ssrn.347241

Larry Catá Backer (Contact Author)

Pennsylvania State University, Penn State Law ( email )

Lewis Katz Building
University Park, PA 16802
United States

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