Manuscript Number : SHISRRJ2033127

After Enron and WorldCom, two once-respected firms, failed spectacularly, Congress passed the Sarbanes-Oxley (SOX) Act in 2002. In addition to being a fundamental legal reform, SOX marks a shift in regulatory approach by incorporating a wide range of corporate governance measures within federal securities law. Prior to SOX, the federal regime consisted of disclosure requirements rather than substantive corporate governance standards, which were left to state corporate law because they were seen to be within the states' purview (Romano 2005). This method is altered by SOX, which gives the SEC clear guidelines and restrictions. Nevertheless, a large number of the governance clauses governed by SOX are not actually novel solutions to issues or shortcomings in the corporate environment. Rather, these are essentially rehashed concepts put out by corporate governance entrepreneurs (e.g., additional independent members in the board and prohibition on accounting firms providing advisory services to auditing customers). It is highly anticipated by practitioners and scholars that SOX will reform ineffective governance procedures and initiate improved bonding and monitoring systems in corporate governance. According to SOX proponents, companies may see improvements in operational performance and company value as they strengthen governance. Empirical data, however, suggests that this could not be the case. Numerous studies have looked into SOX, its requirements, and how they affect firm value and corporate governance. This paper examines previous research on the topic and links SOX to a number of topics in corporate finance as well as market valuation, including accounting firms' productivity and efficiency, decisions about going public and going private, small businesses, lobbying strategies, risk, return, as well as market reaction, trends in corporate governance, global implications and comparisons, and symptoms and underlying issues. The results of research on SOX & its effects are conflicting and not entirely clear. We propose two further suggestions. First, rather than only addressing the symptoms, the government should update SOX rules to address the root causes of issues in the accounting and corporate governance domains if it is to continue taking a one-mandate-for-all approach to SOX. The three-step model demonstrates that SOX requirements have not addressed auditors' diligence and intellectual capacity to identify issues or their abilities to identify suspicious activities. Second, the government should remove the mandatory force of SOX regulations and switch to a "comply, otherwise explain" strategy if it has no imminent interest in changing them as the first option suggests. Because the existing "one-mandate-for-all" system is too expensive for certain businesses, particularly small businesses, they choose not to comply. However, rather than coming from SOX requirements, the advantages of adhering to them might come from improved governance frameworks, especially more vigilant shareholders and an increasingly engaged marketplace for corporate control following Enron's collapse.