Section 806 of the Sarbanes‐Oxley act: Can the fraud triangle prevent fraud in the finance sector?

• Published date: 01 October 2021
• Author: Ashley Bertucci,Tyler Skufca,Stacy Boyer‐Davis
• Date: 01 October 2021
• DOI: http://doi.org/10.1002/jcaf.22520

Received:  August Accepted:  August 

DOI: ./jcaf.

RESEARCH ARTICLE

Section 806 of the Sarbanes-Oxley act: Can the fraud triangle

prevent fraud in the finance sector?

Ashley BertucciTyler SkufcaStacy Boyer-Davis Ph.D.

Northern Michigan University,

Ishpeming, Michigan, USA

Correspondence

AshleyBertucci, Northern Michigan Uni-

versity,Ishpeming, Michigan, USA.

Email:asbertuc@nmu.edu

Abstract

Section  of the Sarbanes-Oxley Act of  provided an important update to

whistleblower protection laws in the United States. The fraud triangle can be

an important aspect of corporate wrongdoing. The concern is whether the fraud

triangle can actually prevent fraud. Special focus is placed on the finance sec-

tor in the Unites States. Three cases in the finance sector were examined based

on their whistleblower complaints filed under the Sarbanes-Oxley Act. Whistle-

blower protections following SOXwere analyzed. The focus is on the Dodd-Frank

Act of . A conclusion was reached explaining the effectiveness of whistle-

blower protections under the Sarbanes-Oxley Act of .

KEYWORDS

Dodd-Frank Act, employment-at-will doctrine, fraud evasion triangle, fraud triangle, finance

sector, Sarbanes-Oxley Act, Section , Whistleblower

1 INTRODUCTION

Whistleblowing has been increasing in the United States.

This could potentially be a result of a variety of account-

ing scandals in the ’s and ’s. Attempting to cut

down on fraud, Congress passed the Sarbanes-Oxley Act of

. One section of the Sarbanes-Oxley Act, Section ,

attempted to protect whistleblowers.

Studies have been conducted using the fraud triangle

to detect and hopefully prevent future fraud. Fraud has

increased in many industries over the years. Specifically,

fraud in the US financial sector has been on the rise. Can

Section  of SOX and the fraud triangle preventor detect

fraud in the financial sector of the United States?

2EARLY WHISTLEBLOWER LAWS

Whistleblower laws have been changed many times over

the years. Laws were changed primarily due to the

employment-at-will doctrine. This would let an employer

fire an employee for any reason or allow an employee

to leave their job for any reason. The employment-at-

will doctrine would have previously allowed employers to

fire whistleblowers for any reason, whether or not they

intended to retaliate against their employee (Rubinstein,

).

Whistleblower laws changed during the ’s. Internal

whistleblowing was recognized under the cases Faragher

v. City of Boca Raton and Burlington Industries v. Ellerth.

These cases allowed internal whistleblowing to finally

become recognized under Title VII of the Civil Rights Act

of  (Rubinstein, ).

3SARBANES-OXLEY ACT OF 2002

The Sarbanes-Oxley Act of  (SOX) was passed after

several scandals by corporations such as Enron and World-

Com. These scandals were related to corporate fraud. In

addition to the scandals, a growth of new whistleblow-

ing laws in the ’s and ’s led to anger towards

the government and big corporations. Congress wanted

the Sarbanes-Oxley Act, to improve the reliability and

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