...a higher 'truth' value than others. As a consequence they easily become generally accepted, sometimes even considered as absolute truths that are not easily questioned". Businesses, non-profit agencies and even the government are all victims of both fraud and theft on a daily basis. Business owners are sometimes blindsided by these actions and may be unaware of the fraud due to lack of accounting experience or expertise. In almost every community, large or small, there are news stories about theft from employees. In several cases, unfortunately, the theft is from those entrusted to perform accounting functions. By the time fraud or theft is detected, sometimes thousands and even millions of dollars are already missing. Another downfall of accounting fraud and theft is the potential for customers and investors to lose confidence in the company or organization’s management. According to the Federal Bureau of Investigation (FBI), some cases of accounting fraud and theft or not even reported. Companies fear the bad press that is associated with reporting internal crimes. Like anything else, the best protection for accounting fraud and theft is prevention. International Corporate Fraud Trend Corporate frauds are likely to be uncovered in many countries. In the leading...
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...scandals that was fraud, such as Tyco and Enron of the United States decided to pass a law to lower the future of probability fraud. The law in the United States requires a financial report that is more comprehensive and it have requirements. The law also have penalties that is stricter on the people who do schemes to throw the investors off. I will use the article name “The Law Changed Corporate America”, by Michael Peregrine, which will identify the law and its major effects. Michael Peregrine believed in the SOX. He felt like it would be very successful. The corporate governance structure was the effect that was explained in this article. This structure was very important. He states that the center of direction which was corporate, from the office in the corner and returned it where it was at in the boardroom. This article also verifies that the SOX had created a “balances and checks” system for the governance corporate. The board of directors had to approve certain actions that the executives had to approve certain actions that the executives wanted to make and the executives had to approve the certain actions the board of directors wanted to make. The executive management team and the board of directors is unlikely to work together to commit fraud. Ethical decision making has importance for companies traded publically. In order to inform investment decisions, the shareholders has to rely on financial reporting and it has to be accurate. When corporate fraud is engaged...
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...regulatory mismanagement and fraud of Enron. This article review will cover topics on how the Sarbanes-Oxley and the collapse of Enron in which affected the ethical decision-making processes in business environments and criminal penalties for which the act provides. Decision-Making in Business Environment “A new generation of corporate leaders has entered the boardroom since Enron’s bankruptcy in December 2001” (Peregrine, 2011, Para. 2). The Act of Sarbanes-Oxley was passed to restore the integrity and to renew consumer confidence in the financial markets. The Sarbanes-Oxley regulates three areas: financial reporting, auditing, and corporate governance. The Sarbanes-Oxley requires businesses and corporations to develop and implement a code of ethics, collaboration, and confidentiality. The significance of this law is to viewed context that affect corporate governance and the exercise duties of officers and directors. Decision-making provides standards and guidelines to those employees of all levels. “This new law impacted accounting and financial decision making because it required companies to be responsible for their financial decisions; it also regulated the way board members and auditors interact, as well as, recognizing and regulating the problem of auditors working for companies that they have personal interest in” (Ganly, 2011, Para. 3). Sarbanes-Oxley affects smaller companies and makes sure the organization is under compliance. Management of such company has the legal...
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...Unraveling the Details of 10 High-Profile Accounting Scandals written by: ciel s cantoria • edited by: Linda Richter • updated: 12/30/2010 Before digging into the dirty details of each of these major accounting scandals, we’ll take a look at some of the tools that were used to first detect them – including sophisticated accounting systems and advancements in high-tech communication. Technology Fighting Against White Collar Fraud Looking back at the 10 major accounting scandals that changed the business world, it was noted that most of their unraveling came about during the turn of the new millennium, which was a time when the American trade and industries were beginning to experience the benefits and detriments of high-tech computerization. Information storage and communication became sophisticated, which made possible the compilation of hordes of information in an instant. Recording and verification of accounting transactions in realtime were made easier and more accurate, which facilitated the reconciliation of supporting documents versus sources, with very little effort needed. Federal regulators were provided with data that revealed the corrupt practices of high-profile companies and their CEOs. Their bankruptcies became inevitable as the Securities and Exchange Commission (SEC) and financial analysts began to see the signs of irregularities among numerous companies. When the SEC ordered the restatement of their financial reports in accordance with the GAAP rules, it...
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...WHY THE SARBANES-OXLEY ACT CAME ABOUT OR HOW TO COOK THE BOOKS The Sarbanes-Oxley Act of 2002 (Sarbox, or SOX) was enacted on July 30, 2002, to protect the general public and shareholders from accounting errors, unethical behavior, and corporate scandal. There are 11 titles that include the requirements for reporting, retention period for records storage, management of electronic records, and standards for external auditors. The act is supervised by the Public Company Accounting Oversight Board, and administered by the Securities and Exchange Commission (SEC). Sarbox requires the CEO and CFO to certify and be liable for the annual and quarterly reports that are filed. If the financial reports are discovered to be untrue, such acts of noncompliance are fines, imprisonment, or both, depending on the severity. The Act was designed for publicly traded companies only, in reaction to scandals such as Enron, WorldCom, and Tyco. These scandals cost investors billions of dollars when the companies collapsed, or the stocks plummeted. These companies altered or destroyed records, defrauded shareholders, or “cooked the books”. When a company cooks the books, it means that incorrect information has been used to create their financial statements. They manipulate earnings and expenses to improve the bottom line, or earnings per share (EPS). This manipulation of information is used to bring in new investors, keep the shareholders happy, attain a bonus, and reach their...
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...The Sarbanes-Oxley Act of 2002 is a legislative act that is considered the most sweeping piece of legislation in accounting governance since the Securities Act of 1934. This relatively new act changed the way companies reported their financial information, created a way for investors to trust companies again after a large scandal, and affects management incentive plans to prevent further acts of fraud. The Sarbanes-Oxley Act, or SOX as it is commonly abbreviated to, was a reaction to a major corporate and accounting scandal; the most recognizable of those companies included in the scandal were Enron, Tyco International, Adelphia Peregrine Systems, and WorldCom. In Enron’s example, they used loopholes to hide billions of dollars in debt that the company had incurred through failed deals and projects. The falsified financial documents convinced investors that nothing was astray and even increased the company’s stock price. Once the fraud was found, the investors sued Enron when their stock price dropped to less than one...
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...of WorldCom, Adelphia, Peregrine Systems, Tyco, and Enron had cost investors and company billions of dollars. Due to lack of organization structure and fraud prevention system companies would likely to be more exposed to employees to commit fraud. Policy like Whistblowing had changed organizations. The article “Whistleblowing and Good Government” is describe how one company should implementing and researching the best method of preventing fraud within company internally and externally. This article also defines the term Whistleblowing, and how to develop the policy and suggesting the best practice that company could use as resources. Article Summary: Over the pass decade there was numerous, both corporate and Government sector had committed some type of fraud that cause company billion dollars a year across the United States. One of the most famous case where higher managers at World Bank took over $2 millions of dollar involved in kickbacks, payoffs, bribery, embezzlement and collusive bidding. With the increasing of fraud many company and non-profit began to implement the SOX within their organization. One of the most important tools of SOX is Whistleblowing policy, the act of reporting wrongdoing to another within the organization internally or externally parties. In 1989 The Whistleblower Protection Act was passed and amended in 1994, to protect any Federal Employees from a worked place from retaliation when they disclosed any fraud. The article discussed...
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...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. This paper discusses the effects of Sarbanes-Oxley (SOX) Act on corporate information security governance practices. The resultant regulatory intervention forces a company to revisit its internal control structures and asses the nature and scope of its compliance with the law. This paper reviews the implications emerging from the mandatory compliance with Sarbanes-Oxley (SOX) Act. Issues related to IT governance and the general integrity of the enterprise are also identified and discussed. Industry internal control assessment frameworks, such as COSO and COBIT, are reviewed and their usefulness in ensuring compliance evaluated. 1. Introduction Accounting scandals at some of the big corporations like Enron, HealthSouth, Tyco and WorldCom had a devastating impact on investor confidence. Clearly, it was possible to engage in frauds of such magnitude because of the inability of auditors to detect early signs of such possibilities. This paper reviews the impact of legal controls on Information Technology (IT) governance practices, especially in the case of SOX Act. The resultant crisis in the financial markets and massive media coverage of the frauds created a situation where...
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...1) INTRODUCTION (FASB 2012) & (Cooper, D. J., Et. Al., 2005 I) The Accountancy Profession (a) Accountants benefits the economy and society by contributing to the efficient allocation and management of resources. (b) Contribute to the growth of individual companies. (c) Promote financial market performance, through the reporting of, and providing assurance on, financial information. i) Needs For Regulation (d) Response to the need for certain standards to be met by the members of that profession. (i) Regulation seeks to ensure the right quality and, where appropriate, consistency in the quality of accountancy services. ii) Benefit Of Regulation (e) Knowledge imbalance between the client, who is acquiring accountancy services, and the provider. (f) Impact On Third Parties. iii) Characteristics Of Good Regulation (g) Areas that regulation of the accountancy profession typically cover (h) The value of ethical behavior. iv) A Shared Approach To Regulation (i) Roles government . (j) Role of professional accountancy organizations. v) Current Regulatory Environment (k) Global adoption and implementations of international high-quality technical and professional standards. (l) External regulation of the market for audits...
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...Management Planning for Tyco MGT 330 Management Planning for Tyco Planning is one of the important actions management must consider when forming the foundation and goals of an organization. The company’s mission is set from the goals set by management. According to Tyco’s mission statement the company’s mission is to, “To be our customers’ first choice in every market we serve by exceeding commitments, providing new technology solutions, leveraging our diverse brands, driving operational excellence, and committing to the highest standards of business practices all of which will drive Tyco’s long-term growth, value and success" (Tyco. 2011 para 1) The best way for Tyco to obtain the goals for the company is for management to distinguish the superior between strategic planning, tactical planning, operational planning, and contingency planning that best serves the needs of the company. While keeping in mind the Influence of legal, ethical, and social responsibilities. Strategic planning or strategic goals is the making of choices concerning the organizations long and short-term goals. These goals can be the supporting element for one or more of the following company growth and profits, return on investments (ROI), market shares, productivity, quantity, quality, and customer satisfaction. Short and long-term goals can range from a week to years to complete. In 2007 Tyco faced adversity when “Kozlowski and Mark H. Swartz, the company's former chief financial officer...
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...of 2002 (Pub. L. No. 107-204, 116 Stat. 745, also known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly called SOX or Sarbox; July 30, 2002) is a United States federal law passed in response to a number of major corporate and accounting scandals involving prominent companies in the United States. This examination of the Sarbanes- Oxley Act of 2002, will address the following: 1.Analyze the new or enhanced standards for all U.S. public company boards, management, and public accounting firms that the SOX required. 2.Examine why the new enhanced standards are necessary 3. Evaluate the benefits and cost of the SOX Through research of the Sarbanes-Oxley Act of 2002, the above questions will be addressed. Analyze the new or enhanced standards for all U.S. public company boards, management, and public accounting firms that the SOX required. Sarbanes-Oxley Act was enacted following a number of major corporate and accounting scandals involving prominent U.S. companies. Public trust in accounting and reporting practices was in a spiraling decline, SOX was designed to protect investors by improving the accuracy and reliability of corporate disclosures made in accordance with the securities laws. SOX standards must be followed or strict penalties for noncompliance can result. According to the U.S. Attorney...
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...Foreign Corrupt Practices Act (FCPA) which criminalized transnational bribery and required companies to implement internal control programs. In response, the Treadway Commission, a private-sector initiative, was formed in 1985 to inspect, analyze, and make recommendations on fraudulent corporate financial reporting. The Treadway Commission studied the financial information reporting system over the period from October 1985 to September 1987 and issued a report of findings and recommendations in October 1987, Report of the National Commission on Fraudulent Financial Reporting. As a result of this initial report, the Committee of Sponsoring Organizations (COSO) was formed and it retained Coopers & Lybrand, a major CPA firm, to study the issues and author a report regarding an integrated framework of internal control. In September 1992, the four volume report entitled Internal Control— Integrated Framework was released by COSO and later re-published with minor amendments in 1994. This report presented a common definition of internal control and provided a framework against which internal control systems may be assessed and improved. This report is one standard that U.S. companies use to evaluate their compliance with FCPA. COSO was formed in 1985 to sponsor the National Commission on Fraudulent Financial Reporting (the Treadway Commission). The Treadway Commission was originally jointly sponsored and funded by five main professional accounting associations and institutes headquartered...
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...Sarbanes-Oxley Act of 2002 I. Introduction The Sarbanes–Oxley Act of 2002 (Pub.L. 107-204, 116 Stat. 745, enacted July 30, 2002), also known as the 'Public Company Accounting Reform and Investor Protection Act' (in the Senate) and 'Corporate and Auditing Accountability and Responsibility Act' (in the House) and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002, which set new or enhanced standards for all U.S. public company boards, management and public accounting firms. It is named after sponsors U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH). The bill was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation's securities markets. The Sarbanes-Oxley Act does not apply to privately held companies. The act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. Harvey Pitt, the 26th chairman of the Securities and Exchange Commission (SEC), led the SEC in the adoption of dozens of rules to implement the Sarbanes–Oxley Act. It created a new, quasi-public...
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...corporate board responsibilities to criminal penalties, and empowers the Securities and Exchange Commission (SEC) to implement rulings that comply with the said act/law. The objective of this law was two-fold: 1) to restore the public confidence in public accounting, auditing and public securities trading 2) to assure ethical business practices by demanding executive awareness and accountability. But why and how did this law come to fruition? What events prompted these U.S. lawmakers to pass this bill in the first place? This bill was enacted as a reaction to a number of major corporate and accounting debacles (or accounting scandals). Some of those corporate accounting scandals involve companies such as Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of these affected companies collapsed and shook public confidence in the US securities markets. To better understand SOX, it is best to understand the first company that found itself in that accounting predicament: The Enron Corporation. II. Enron: The Very First Reason for SOX Enron began in 1985. Kenneth Lay was its chairman and CEO. Enron was the result of merging two natural gas and energy companies: Houston Natural Gas and Internorth. The resulting Enron Corporation was a based in Houston, Texas and was an American commodities and services company. At that time, it was also one...
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...| | | | | | | | | | | Standard setting, best practices and corporate governance reform Legislative initiatives and proposals, e.g. Sarbanes–Oxley Mariecris Dela cruz May 11, 2013 Submitted by: Rose Chezca D.G Regalado Submitted to: Prof. Carolina C. Guerrero May 18, 2013 Sarbanes- Oxley act also known as the Public Company accounting reform and investor protection act ( In the Senate) and Corporate and Auditing Accountability and responsibility Act ( in the House) commonly known as SOX act or Sarbox Act. Sarbanes-Oxley Act was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine System and Worldcom. I think Sarbanes Oxley Act was indeed the wake up call for all those companies who violates the laws, those who has a fraudulent financial activity and those who are involved into illegal activities not just in the USA but also companies around the world. Though there are people and organizations who support SOX, there are also numerous complaints and opposition against this act. I think, The real question is DO THE BENEFITS OF SARBANES OXLEY ACT, JUSTIFY ITS COSTS? “Facing a possibility of 20 years in jail and $5 million fines, executives are going to spend lots of time going over financial statements, and less time creating, innovating and leading,” - James Glassman, resident fellow at the American Enterprise Institute “ If the CEO of a $50-billion...
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