...What exactly is the Sarbanes-Oxley Act? Who does it protect? Who benefits from SOX most? I will discuss what the Sarbanes-Oxley Act (SOX) is its key components, and its primary objective. Also, I will discuss the criticisms surrounding the SOX act. Why it is important to enforce the Sarbanes-Oxley Act. Finally, I will discuss if the SOX has achieved its goals. The main purpose of Sarbanes Oxley Act is to ensure that the corporate sector works with transparency and provides full disclosure of information as and when required (Bing, 2007). This basically means that corporations must keep good records of what goes on in their business, not just for their benefit, but just in case of an audit, then they’ll have all their transactions ready to be reviewed and to keep future corporate scandals down. The Sarbanes-Oxley Act was passed by Congress on July 30, 2002. The law forced public companies to spend much more money having their books thoroughly audited, and it increased the penalties for executives who defrauded investors. Since the bill's passage and implementation, nervous investors who had yanked trillions of dollars from the market have returned (Farrell, 2007). The men behind the Sarbanes-Oxley Act consist of U.S. Treasury Secretary Henry Paulson, New York Stock Exchange CEO John Thain and former AIG chief Maurice "Hank" Greenberg. Even though their voices my appear to be isolated, Charles Niemeier a member of the Public Company Accounting Oversight Board...
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...A Primer on Sarbanes-Oxley The Sarbanes-Oxley Act was declared a law in 2002 (Orin, 2008). The primary purpose of this new law was to convey meaning to restoring faith in corporate America’s financial endeavors (Orin, 2008). The Sarbanes-Oxley Act was meant to aid and protect investors, who suffered extreme losses because of corporations having poor financial performances, which was the case before the law was enacted (Orin, 2008). Distinctively, the Sarbanes-Oxley Act was meant to concentrate on accounting fraudulence by holding corporations accountable for disclosing accurate and reliable financial records. The Sarbanes-Oxley Act was also meant to ensure corporate executive leadership acted ethically throughout daily business (Orin, 2008). Assess the Effectiveness of SOX Legislations Key Ethical Components of the SOX To efficiently and effectively implement the Sarbanes-Oxley Act corporations need to broaden their views and focus on the greater purpose of the Sarbanes-Oxley Act. Beasley and Hermanson (2009) believe to accomplish this corporate leadership need to focus on the following: • Value the purpose of the Sarbanes-Oxley Act. • Comprehend the effect of fraudulence behavior. • Concentrate on ethical attitudes pertaining to rationalizing fraudulence behavior. • Making the Sarbanes Oxley Act the foundation to compliance to improve governance and control. • Investigate and implement enterprise risk management (para 5). Value...
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...Sarbanes Oxley Act Joslin Cuthbertson Hampton University Abstract The Sarbanes-Oxley Act came into effect in July 2002 and introduced major changes to the guidelines of corporate authority and financial practice. It is named after Senator Paul Sarbanes and Representative Michael Oxley, who were its main originators. The Sarbanes Oxley Act set a number of non-negotiable deadlines for publically traded companies to comply to. The Sarbanes-Oxley Act is arranged into eleven titles. As far as compliance is concerned, the most important section within these eleven titles is usually considered to be Section 404, which deals with internal controls. Since 2002, there has been a lot of debate about whether the act has positively or negatively affected corporate America. In this paper I have discussed the opinions of both sides of the argument. The Sarbanes-Oxley Act is a bill passed by Congress in 2002 after several corporations took actions that caused their companies to fail. These companies include Enron and WorldCom. As a result of these actions, stockholders lost confidence in the financial system. The intent of the bill is to protect investors of corporations by making the corporations accountable for any unacceptable accounting errors and practices. The Act is named after its main proponents, Senator Paul Sarbanes and Representative Michael Oxley. The Acts real name is the Public...
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...Sarbanes-Oxley Act of 2002 Sarbanes-Oxley Act of 2002 U.S. Senator Paul Sarbnes of Maryland and U.S. Representative Michael Oxley of Ohio followed a series of corporate failures, which inacted the SOX Act based on Enron’s bankruptcy and other key organizations such as Worldcom, Tyco, Xerox, and Adelphia who were among the United States organizations executives in the headlines for misdemeanors and multi-billion dollar reassertions," (Dembinski, Lager, Cornford, Bonvin, 2005). The Sarbanes-Oxley Act of 2002, (SOX) was incorporated to strengthen the internal improvements and oversight of corporate control. The primary purpose is to shield and protect shareholders from fradualent activities within the public sector and the stock market. The table below provides a list of a few provisions implemented in SOX Act. Section 302 | Section 401 | Section 404 | Section 409 | Section 802 | Requires that corporate administration confirm that they have assessed the financial reports. | Requires that financial reports include disclosure about any applicable off-balance sheet responsibilities that may exist. | Requires organizations to state whether or not the business's internal mechanism technique are sufficient and operative. | Requires administration to update the public of important budgetary matters when they occur, instead of waiting until the annual or quarterly report. | Imposes penalties for abuses of the SOX rules, which could lead to fines or some jail time. | A description...
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...Sarbanes-Oxley Act Financial Management Miriacle K. Black Belhaven University Abstract In 2002 an Act by the name of Sarbanes-Oxley was implemented following the bankruptcy of Enron, an American energy, commodities, and Service Company that was based out of Houston, Texas. This paper will discuss and describe the Sarbanes-Oxley Act; also it will answer such questions as: Why was the Sarbanes-Oxley Act enacted? What was the impact of the Sarbanes-Oxley Act? Also, my opinion of whether or not I thing this Act will somehow stop accounting practices. This Act is surely a case of one bad apple spoils a bunch. Sarbanes-Oxley Act The Sarbanes-Oxley Act is a case of one bad apple spoiling a bunch. What is meant by this statement is because of one company’s selfishness and greed; a lot of other companies now have different hoops to jump and straight lines to walk, to keep the same thing from happening again. Not to say outright that the Act is a bad thing because it’s not. When companies go bankrupt that particular company is not the only thing that is affected, these companies have investors and stockholders and they too are affected. This act will allow for such companies and their employers to stay on the straight and narrow. The Sarbanes-Oxley Act was enacted in 2002 following the bankruptcy of Enron, an energy trade company out of Houston, Texas. According to lawyershop.com, Enron kept the fact that they were billions of dollars in debt from its shareholders (Shaw, 2008)...
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...been around for a long time now. Depending on the laws that governed us, we are requiring to maintain records. A good document retention policy could last up to seven years. A litigation hold is basically keeping all records pertaining to the case, or until the case is over. Depending on the records at hand, state and federal laws require organizations to maintain records. During litigation hold notice a good checklist to follow, is a good idea. A document retention policy basically establishes a policy that keeps records of documents and files for a certain amount of period, so that a court can examine a business practices over a time period. Courts and juries don’t have little tolerance for organizations that don’t maintain their records. They often give penalized corporations for keeping their records, by handing out big fines. A document retention policy is established after a litigation hold is given to an organization. Depending on the litigation hold certain documents must be maintain in order to prevent penalties. So if the litigation hold is pertaining to a HIPPA violation at a college, the college must maintain all records to include, emails, documents, faculty involvements, telephone conversations, backup tapes, hard drives, flash drives and etc. The policy has to be clear and understanding to faculty. The files must be in preserved in original format, and cannot be altered at any time. The Sarbanes-Oxley Act of 2002 was passed through the senate and the house...
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...“Sarbanes-Oxley (SOX) Act and its impact on corporate America” In order to understand why the Sarbanes-Oxley Act came to be, it’s important to acknowledge some of the mistakes made by some companies that led to the creation of this Act. The Sarbanes-Oxley Act was originally enacted in the wake of the Enron scandal, but then pushed to congress after a series of high-profile financial scandals followed Enron, including WorldCom and Tyco that rattled investor confidence and the level of confidence that the public held in corporate America (Rouse). Enron Corporation was one of the largest energy companies in the world, marketing primarily electricity and natural gas but also provided financial risk management for its clients. Enron’s demise began in 1997 when it bought out a partner’s stake in a company (JEDI) and in turn sold that stake to another company (ChewCo) which was created, owned, and operated by Enron (Rouse). This began the multi-layered strategy of transactions that allowed the company to hide debts, report inaccurate accounting errors, making the company appear much stronger and financially sound than it was in reality (Rouse). The Sarbanes-Oxley Act was created in 2002 by Senator Paul Sarbanes and Representative Michael Oxley and signed off by President Busch and introduced and enforced major changes to the regulation of corporate governance and financial practice. The Sarbanes-Oxley Act is arranged into eleven 'titles' (www.soxlaw.com). As far as compliance is...
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...Effects Of The Sarbanes-Oxley Act Of 2002 On Financial Statements ACC/291 10/07/12 It’s inevitable for a company to have down periods when they are not making a profit and sometimes even spending more than they are bringing in. Companies that are publically traded are governed and sanctioned more than sole proprietorships (SP) and Limited Liability Companies (LLC). When the company is a sole proprietorship or a limited liability company government and regulations are basically reviewed and enforced internally. That’s a privileged that these types of organizations have. Owners may sometime not handle finances appropriately or may not have checks and balances in place from any outside sources to make sure everything is handled correctly. Organizations of any other sort than SP’s and LLC’s are under the scrutiny of The Sarbanes Oxley Act. Sarbanes-Oxley Act of 2002 was basically established to deal with unethical behavior and corporate social responsibility issues. This law was established to enforce accounting auditing and to protect investors. Companies like Enron and WorldCom scandals made it imperative for Congress to pass such a law to protect Investors, Corporation Employees, etc. This Act was not favored by a lot of organizations. Companies had to create procedures to meet what SOX require and it’s compliance. Procedures were required to be established to enforce the checks and balances...
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...What is the purpose of the Sarbanes Oxley Act? LIB100, Class Section Quincy Leon Professor Kahn Fall 2011 Topic: What is the purpose of the Sarbanes Oxley Act? Thesis statement: Patients who suffer from depression often think that they are faced with two treatment options. They can participate in psychotherapy and/or they can take a regimen of psychotropic medication. It is important for mental health practitioners to impress upon their patients that 30 minutes of moderate exercise performed 4 times a week can also lift their mood and play a role in their recovery. Search strategy and evaluation of resources: I began my research on the purpose of the Sarbanes Oxley act by searching the ASA library online catalog for books that spoke mainly about that topic. I chose the ASA library because it is a college library; it only contains books or articles that are meant for research. Also, the library contains credible sources necessary for a research project. I chose two books to use for my research. The first being Sarbanes-Oxley act of 2002: Law and Explanation. I chose this book because it is considered to be an authoritative source which contains the necessary background information one would need at the commencement of a research project. The next book I chose was Sarbanes-Oxley Act of 2002: Conference Report. I chose this book it too spoke primarily about the SOX Act. This report is authoritative because it is written by the United...
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... Rashad Abdullah Ethical Behavior Page 2 President George W. Bush signed the Sarbanes Oxley Act into law on July 30, 2002. This law set new and enhanced standards for public companies and the boards, management and accounting firms. The Sarbanes Oxley Act also brought about considerable changes to the financial reporting and auditing practices of public companies. The act holds top executives for these companies personally responsible for the financial data and its timeliness, with non-compliance having criminal consequences. There are several ways to measure the effectiveness of SOX because effectiveness can mean different things to different people depending on their opinions on what will mean the law is actually working. The first and easiest way one might determine effectiveness is by the amount of fraud that companies have done that have actually been recovered. This determinate will never actually have a true answer because what company will openly admit that yes we have committed fraud but we have not been caught yet knowing the punishments for the crime. Since this is not plausible another way to measure effectiveness is to get feedback on its effectiveness by people who are affected by the act. The second way is measuring the investors’ confidence. Using a study by Engebretson & Meier, who question random people who were affected by SOX to measure...
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...OF THE SARBANES OXLEY ACT BY TREVOR GARRETT 02/25/2011 Abstract Enron Corporation was one of the largest energy trading, natural gas and Utilities Company in the world that was based in Huston, Texas. The downfall of Enron is one of the most infamous and shocking events in the financial world, and its reverberations were felt around the globe. Prior to its collapse in 2001, Enron was one of the leading companies in the U.S and considered among top 10 admired corporations and most desired places to work at. Its revenues made up US $139 to $184 billion, assets equaled $62 to $82 billion, and the number of employees reached more than 30,000 people in 20 countries around the world. While on the surface it seemed like the perfect Corporation, internally it had highly decentralized financial control and decision-making structure, which made it practically impossible to get coherent and clear view on corporations' activities and operations. Enron manipulated its books and assets to help it report steady profit growth to Stock Exchanges and Credit-rating agencies. Investors generally are not willing to pay as much for the stock of a volatile trading operation, and this gave rise to manipulations. This paper briefly describes the legal and ethical breaches by Enron, the key factors and events that led to its collapse and the passing of the Sarbanes Oxley Act as a consequence of such a catastrophe. The paper also discusses the key components of the Sarbanes Oxley Act and its...
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...appointed the first Chief Auditor and Director of Professional Standards for the Public Company Accounting Oversight Board. As such he was the primary advisor to the PCAOB on policy and technical issues relating to the auditing of public companies, including but not limited to auditing standards, registration, inspection, and thus enforcement of any mandates that are part of the Sarbanes-Oxley Act. QUESTION 2) WHAT DOES CARMICHAEL SEE AS THE UNDERLYING MISSION OF THE PCAOB? Carmichael views the underlying mission of the PCAOB to be the restoration of the public’s confidence in the auditor’s reports and findings. Accounting scandals, involving companies like Enron and WorldCom, prompted Congress to adopt the Sarbanes-Oxley Act as a means to establish control over accounting and auditing functions. A main focus of Sarbanes-Oxley was the establishment of the PCAOB. The PCAOB is a nongovernmental body, fully funded by fees collected by public and investment companies that benefit from independent audits. They are charged with overseeing the audit of public companies that are subject to SEC laws and related matters of the kind. Carmichael states that the confidence is not only to be earned by the accountants and auditors producing and reviewing the information, but also “by those who aspire to set the standards for auditors.” QUESTION 3) ACCORDING TO CARMICHAEL, WHY IS IT SO IMPORTANT THAT THE PUBLIC HAVE CONFIDENCE IN THE INDEPENDENT AUDITORS OF PUBLIC COMPANIES...
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...CLASS PROJECT GM 520: BUSINESS REGULATIONS: SARBANES-OXLEY August 14, 2006 Need a Sarbanes Oxley Compliance Plan? The Sarbanes-Oxley Act of 2002, sponsored by US Senator Paul Sarbanes and US Representative Michael Oxley, represents the biggest change to federal securities laws in decades. Effective in 2006, all publicly-traded companies are required to submit an annual report of the effectiveness of their internal accounting controls to the SEC. It came as a result of the large corporate financial scandals involving Enron, WorldCom, Global Crossing and Arthur Andersen. Provisions of the Sarbanes Oxley Act (SOX) detail criminal and civil penalties for noncompliance, certification of internal auditing, and increased financial disclosure. It affects public U.S. companies and non-U.S. companies with a U.S. presence. SOX is all about corporate governance and financial disclosure. High-profile business failures culminating in a media fixation on Enron called into question the effectiveness of business’ self-regulatory process as well as the effectiveness of the audit to uphold public trust in capital markets. Legislation to address shortcomings in financial reporting was slowly progressing in Congress. The sudden collapse of WorldCom guaranteed swift congressional action. President Bush signed the Sarbanes-Oxley Act in to Law on July 22, 2002. The most significant legislation affecting the accounting profession since 1933. Developing...
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...Effect of Unethical Behavior Article Analysis Lindsey Davison August 26, 2013 Acc/291 Jonathan Gillen Effects on Financial Statements When the Sarbanes-Oxley Act was implemented in 2002, it impacted a lot of publically traded companies. There were many companies that were using unethical practices to boost their numbers and give the top dogs of the company’s loads of money. Companies like Enron, Tyco, and WorldCom were companies that most of us heard about getting hit the hardest once the act was put into place. The Sarbanes-Oxley Act created a Public Accounting Oversight Board to ensure that financial statements are audited according to specific standards. This makes it to where those who are in top financial positions such as Financial Executives and Chief’s are held directly responsible for what is being reported to the SEC. With that being said, the Act also makes it to where the audits aren’t in complete control of those in top positions, so they can’t audit their own work basically, which is exactly how the above mentioned corporations got away with it for so long. There have been both positive and negative effects of the Act; positive effects are that investors are more confident in making solid investments (Fass, 2003). Some negative effects are that companies are spending a lot of time, money and concentration on updating their software to be up to par on the new standards, like the Section 404 certification (Fass, 2003). Those are just minimal if you...
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...The Effects of the Sarbanes-Oxley Act There have been widespread reactions to corporate scandals which have become seemingly common in corporate America. Government reaction to these unethical corporate and accounting scandals has led to regulation and intervention. The Sarbanes-Oxley Act of 2002 is seen as a response to the lack of corporate governance present in many corporations. The Sarbanes-Oxley Act of 2002 is also known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly called Sarbanes-Oxley, Sarbox, or SOX. This United States federal law was enacted on July 30, 2002 in response to a number of major corporate and accounting scandals, including those affecting Enron, Tyco International, Adelphia, Peregrine Systems, and WorldCom. The act is administered by the Securities and Exchange Commission. It sets deadlines for compliance and publishes rules on requirements. The Act contains 11 titles; these describe specific mandates and requirements for financial reporting. Moreover, the Sarbanes-Oxley Act introduced major changes to the regulation of financial practice and corporate governance. It is seen as the most important legislation affecting corporate financial reporting enacted in the United States since the 1930s” (Li, 1). It is extremely essential in to ensure protect to shareholders and the general public from accounting errors and fraudulent practices in an enterprise. However, with government regulation and intervention one must...
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