The Magnitude of Professional Risk Created by The Sarbanes-Oxley Act of 2002 and The Companies Act of 2006

Open Access
Author:
Cancro, Carolynn Maria
Area of Honors:
Interdisciplinary in Accounting and Legal Environment of Business
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Orie Edwin Barron, Thesis Supervisor
  • Jeffery M Sharp, Thesis Supervisor
  • Orie Edwin Barron, Honors Advisor
  • Daniel Robert Cahoy, Honors Advisor
Keywords:
  • United States
  • Companies Act of 2006
  • Sarbanes-Oxley Act of 2002
  • risk
  • United Kingdom
Abstract:
This study explores the professional risk for accounting professionals in the United States and the United Kingdom by examining the countries’ most recent, dominant accounting laws: the Sarbanes-Oxley Act of 2002 and the Companies Act of 2006. The United Kingdom provides a good comparison to the United States because of their shared common law traditions of codification and legal precedents. There are two arms of risk: the magnitude of the consequence and the probability that the consequence will be issued. This paper assesses only the magnitude of professional risk in the two countries by studying the provisions for personal liability for the commission of fraud created by the two pieces of legislation. The question is approached by comparing the magnitude of penalties, the scope of the laws’ provisions, and the intent of the legislators. Because the Sarbanes-Oxley Act of 2002 was a reform law intended to amend market weaknesses seen by the widespread fraud and the Companies Act of 2006 was intended to compile and streamline corporate law, the Sarbanes-Oxley Act of 2002 treats the fraudulent behavior of directors and auditors of publicly traded companies more severely.