Internal control in the wake of the Enron scandal - legislation or self-regulation?
Abstract: Background & Problem Discussion: The collapse of Enron together with severalother scandals contributed to the creation of the Sarbanes Oxley Act, imposing heavydemands on accounting ethics for businesses listed on the stock exchange in the US.In Sweden, the Swedish Code of Corporate Governance was introduced, but insteadof being a law, it is based on self-regulation. The purpose of both SOX and the Codeis to gain the trust of potential investors by ensuring that companies are managed aseffectively as possible in accordance with the interests and the objectives of the shareholders. As both exist for a common purpose, this study will try to answer which onethat better fulfills the purpose, by investigating Swedish companies view on the topic.Purpose: This study will try to answer, out of Swedish companies’ perspective, whatis most effective, self-regulation, with the possibility to either comply or give an explanationfor not complying, or detailed regulation by law?Delimitations: This study is limited to investigating companies listed on the US orSwedish stock market. Focus is put on Sarbanes-Oxley Act and Swedish Code of CorporateGovernance, in particular their regulation of internal control.Methodology: Initially, laws and regulations were investigated to form a frameworkupon which further studies throughout the report were based. The empiric consists ofeight interviews, which were summarized and analyzed, from which conclusions weredrawn.Result and Conclusions: There is no reason to abandon self-regulation. Instead, anoverall better framework with some compulsory rules should be developed, in order toprovide the best possible help in improving the internal control.Suggestions on Future Studies: In would be interesting to study what view the accountingfirms have on the topic. Furthermore it would also be interesting to interviewother employees within the organizations, to learn what changes they have observed.Finally, it would be interesting to investigate if companies have a different view oninternal control in a few years from now.
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