Using Communication Theory to Analyze Corporate Reporting Strategies in the Banking Industry (Report‪)‬

INTRODUCTION The problems relating to business failures early in this decade exposed manipulations of financial reporting, distortions in economic performance in the accounting for and disclosure of transactions, and lapses in corporate governance. These problems resulted in Congress establishing requirements for corporate governance through its passage of the Sarbanes-Oxley Act (SOX), which requires firms to disclose material weaknesses in internal controls for financial reporting, directs management to disclose its assessment of those internal controls, and mandates that each company's independent auditor assess the management report and the company's systems of internal control. With the enactment of SOX, the U.S. Congress acknowledged major issues relating to the quality of earnings, transparency of financial reporting, and investor confidence in financial reporting and directed the SEC to study a principles-based accounting system (United States Congress 2002, Sarbanes-Oxley Act Section 108). The major objective of SOX is to attempt to protect investors by improving the accuracy and the reliability of corporate disclosures that increase the transparency of reporting.