How The Hero Saves The World

On Dec. 2, 2001, the Enron Company filed for bankruptcy protection with＄49.8 billion valued assets on the bankruptcy list. The company became the largest bankrupt enterprise in the history of the United States. As a result, the Security Exchange Commission and some industry organizations got to investigate the irregularities in the financial reports of the public companies. Since then, a series of scandals of the public companies' emerged.From the germination period of the security market in the United States, after the so-called the Great Depression in the 1930s, the information disclosure system has been proved most effective to regulate the security market. Nevertheless, the Enron's scandal told people something else that none system could be perfect. In the past system, the public companies should have obeyed the accounting regulations; the registered accounting firm should have pointed these wrong doings out; the Security Exchange Commission should have discovered the irregularities; the judicial system should have deterred the irregularities. Yet, all of them have failed. The "Sarbanes-Oxley Act" tried to compensate for the weaknesses of the old system, forcing the players to take on their duties. First, to enhance the independence of the external audit, the SOX Act created a new institution, the Public Company Audit Oversight Commission, and forbad registered accounting firm to provide the non-audit service to the public companies. Second, the Act forced the public companies to file reports on the internal control every year. Third, the Act strengthened the Security Exchange Commission's power by transferring more funding and resources. Forth, the Act reinforced the deterrence of the legal responsibilities on both civil and criminal means. Although the Act remains imperfect, it saved the confidence of the investors' and mended the loophole of the old system in a sense.