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Effect of Unethical Behavior Article Analysis

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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 look at the amount of money that stockholders actually lost with Enron, which was around 63 billion dollars, where audit fees back in 2003 was 3.6 billion.
One question that I still have is; is there a board that audits the auditors? I know that there was a board specific to auditing, but who is to say people aren’t being paid off by these corporations to boost their statements for them?

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