...Sarbanes-Oxley Act (SOX) ACC290 March 29, 2012 Sarbanes-Oxley Act (SOX) The Sarbanes-Oxley Act (SOX) was created on July 2002 after numerous financial scandals involving companies such as Enron and WorldCom. The main section of the act which is section 404(a) requires management to provide the financial reporting accurately and effectively. This is called Internal Control over Financial Reporting (“ICFR”). There are several sections that have been created to assure the accuracy of the financial reports provided by any given company. The accountant has to be approved by the board and cannot falsify or make any incorrect entries on the financial reports. The accountants have to be accurate and efficient in order to avoid fines or penalties which are very high and can end up in incarceration. Under SOX, a company needs to keep track of employees’ degrees and certifications to ensure that employees continue to meet the specified requirements of a job. An independent auditor will assess the reports and investigate any discrepancies if needed. (2010, Kimmel) There are some companies that designate their own internal control department to assure the public and shareholders of periodic reviews. The internal control department is solely dedicated to follow SOX requirements and is not to deviate from the main categories. After the creation of the Sarbanes-Oxley Act, companies change the way they report the financial statements to the shareholders and made them realize that by...
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...Sarbanes – Oxley Act The Sarbanes-Oxley Act (SOX) is named after its’ sponsors, U.S. Senator Paul Sarbanes and U.S. Representative Michael G. Oxley. The act was enacted on July 30, 2002. It is also known as the Public Company Accounting Reform and Investor Protection Act (Senate) and the Corporate and Auditing Accountability Act (House). The bill was enacted as a reaction to a large number of major corporate and accounting scandals. These scandals raised public confidence in the nation’s securities markets. The bill does not apply to privately held companies. The Act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties and it requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. Under the Sarbanes-Oxley Act, two separate sections came into effect, one civil section and one criminal section. Section 302 of the Act mandates a set of internal procedures designed to ensure accurate financial disclosure. The signing officers must certify that they are responsible for establishing and maintaining internal controls to ensure that material information relating to the company and its consolidated subsidiaries is made known to such officers by others within those entities, particularly during the period in which the periodic reports are being prepared. The officers must have evaluated the effectiveness of the company’s internal controls...
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...the effects of the Sarbanes-Oxley Act of 2002 on financial statements. Since the Enron scandal at the end of 2001 there have been several reports of unethical practices as well as poor behavior. So what exactly leads someone to report false information? In most cases that I have seen it usually begins with minor accounting infractions. When companies don’t perform well financially, stock holders may lose millions of dollars on their investments. The person in charge may decide to falsify the figures when reporting them to insure their position within their company. I believe the feel they can correct the numbers before anyone would notice. On the other hand, some CEO’s and financial officers are make bonuses and profits when they show how well a company is doing. Their own personal greed is the only thing that concerns them no matter how well the company is doing. It might be several top executives involved to just a couple of individuals, however the people who pay for their unethical decisions are the stock holders, employees and the public. The Sarbanes-Oxley Act was enacted July 29, 2002 and was named after U. S. Senator Paul Sarbanes and U. S. Representative Michael G. Oxley. According to CNNMoney March 24, 2010 a report by McGuffin a highly readable 2000 page report, Lehman Brothers has been accused of using an accounting loophole to massage its books, and they question whether regulators can anticipate or prevent malfeasance. The idea of Sarbanes-Oxley was to stop...
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...Effect of Unethical Behavior Article Analysis 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 more commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law that 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). As a result of SOX, top management must now individually certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. Also, SOX increased the independence of the outside auditors who review the accuracy of corporate financial statements, and increased the oversight role of boards of directors.[1] 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 act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties, and requires the Securities and Exchange...
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...Guide MEMORANDUM UNIVERSITY OF PHOENIX DATE: TO: FROM: RE: Bumgardener, L. (n.d.). Retrieved from http://gbr.pepperdine.edu/2010/08/reforming-corporate-america/ ARTICLE SYNOPSIS This article discusses the Sarbanes-Oxley Act and how it was formed. Sarbanes-Oxley Act is named after U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH) who sponsored it. Under the guidelines of Sarbanes-Oxley Act, top management must now individually certify the accuracy of financial information. The need of this act came about after the markets crash in 1929. Congress began looking into corporate fraud in the 1930’s and began the Securities Act of 1933. This law was viewed insufficient; in just one year congress passed the Securities Exchange Act of 1934. This was viewed to be good enough until corporations began to get caught in fraud again like, Enron in 2001. So, in 2002 the Sarbanes-Oxley Act was passed to help get a handle on new corporate fraud. LEGAL ISSUE The article pointed out how a business practice of the late 90’s and early 00’s lead to stricter federal regulations and auditing. Enron for one was borrowing money to cover loss and hiding funds in offshore accounts; this was all too raised their stock value. Sarbanes-Oxley Act is the response to this type of businesses and helps the government to keep a handle on it. MANAGERIAL PERSPECTIVE Discuss how the legal issues affect business. For example, could the problems have been avoided...
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...Thomas Individual Paper ACC/291 01/30/2013 My individual paper is going to focus on unethical accounting practices and how the Sarbanes-Oxley Act is used in today's world to try and limit companies from falsifying accounting statements. One way that companies use unethical practices would be a practice known as cooking the books, this would involve a company falsifying information on their financial statements. There are numerous reasons why a company would do this but the number one reason that they do it is because they are having financial issues with their company and they don't want to go under or fill for bankruptcy or they are just doing it for greed. One way that the government is trying to limit the use of such practices is passing Acts like the one U.S. Congress passed in 2002 called the Sarbanes-Oxley Act, this act mandated that there be stricter reforms on companies so that they can improve their financial disclosures, and preventing cooking the books and preventing accounting fraud. This Act was passed after all the early scandals in the late 1990's and early 2000's such as Enron. This act was named after their main architects, Senator Paul Sarbanes, and Representative Michael Oxley and it is used to deter and punish corporate and accounting fraud and corruption. The Sarbanes-Oxley Act has eleven titles, that all have to do with the company remaining in compliance with the Act. Another way that companies use unethical practices would be embezzlement,...
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...The Family Educational Rights and Privacy Act is a Federal law that protects the privacy of student education records. The law applies to all schools that receive funds under an applicable program of the U.S. Department of Education. FERPA gives parents certain rights with respect to their children's education records. These rights transfer to the student when he or she reaches the age of 18 or attends a school beyond the high school level. Students to whom the rights have transferred are "eligible students." The Sarbanes–Oxley Act of 2002 also known as the 'Public Company Accounting Reform and Investor Protection ACT and 'Corporate and Auditing Accountability and Responsibility Act and more commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law that 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). As a result of SOX, top management must now individually certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. Also, SOX increased the independence of the outside auditors who review the accuracy of corporate financial statements, and increased the oversight role of boards of directors The bill was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International...
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...Sabranes-Oxley Act In the wake of the Enron and WorldCom scandals in the late 1990’s and early 2000’s, the American public was concerned about the scandals in accounting practices of corporations and accounting firms. Corporations, such as Enron, WorldCom and Tyco International, and accounting firms, such as Authur Anderson, went out of business (Horngren, 2009). Congress enacted The Sabranes-Oxley Act of 2002 to resolve such concerns. This act was brought to the United States Senate as “Public Company Accounting Reform and Investor Protection Act” and “Corporate and Auditing Accountability and Responsibility Act” in the United States House of Representatives. It is commonly called Sarbanes–Oxley, Sarbox or SOX and named after the U.S. politicians that constructed this legislation - Senator Paul Sarbanes and Representative Michael Oxley. The purpose of SOX is to begin “major changes to the regulation of financial practice and corporate governance” (n.d, 2006). SOX created new standards for corporate accountability and penalties for acts of wrongdoing. It changes how corporate boards and executives must interact with each other and with corporate auditors. SOX Relation to Internal Control According to the textbook, internal control is comprised by five components: Monitoring of controls, Information systems, Control procedures and Risk assessment (Horngren, 2009). SOX included new internal controls and procedures designed to ensure the validity of their financial records...
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...The Sarbanes-Oxley Act 1. Analyze the new or enhanced standards for all U.S. public company boards, managements, and public accounting firms that the SOX required. The Sarbanes-Oxley Act of two thousand two was an important act for business and investors. Before the act many companies were doing unethical and illegal business practices. Accounting officers were not being held accountable for their actions that effect investors and stocks. This act was introduced to keep accounting information honest and without untrue statements or omissions. The legislation was enforced in 2002 to regulate financial practice and corporate governance. The act was named after Senator Paul Sarbanes and Representative Michael Oxley it contains eleven titles. Numerous inventors and business owners sensed that these disingenuous documents were the consequence of business carelessness in addition to deficient in of appropriate examination of fiscal proceedings by qualified auditors. 2. Examine why the new enhanced standards are necessary. I believe that the new enhanced standards are necessary. The new standards hold officers accountable for their actions and pertain to “Corporate Responsibility for Financial Reports”. In Section three hundred two of the act of periodic statutory financial reports have to include certifications assigning officer or officers have reviewed the report. The report does not contain any untrue statements or material omission...
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...material on business reports for private expansion. A lot of of the matters we go through with the present economy are responsible for the unethical conduct in the accounting business. Two of the well-known corporations that were finally jammed and arraigned for unethical conducts were Enron and WorldCom. The misrepresentation of business statements and deceitful commotion in the stock market affects thousands of stakeholders to miss money. Throughout this humiliation, a hand full of people in this company was making millions of dollars from other people expense. The Sarbanes Oxley Act of 2002 or frequently mention as Sox is known as Representative Michael Oxley and Senator Paul Sarbanes. Sox were announced to law in 2002 with the new rule guidelines concerning the approaches of economic procedures of organizations. Accurate and timely financial reporting is two of the major keys to the success of Sox ("Sarbanes-Oxley Act Section 401", 2003). The result of Sox on fiscal statements involves correct and not misrepresentative by covering improper reports. It also entails more revelation of relations and accountabilities. Investor has the right to know if a business is conducting...
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...Effect of Unethical Behavior Article Analysis Accounting scandals grew increasingly in the early 2000’s. Due to these scandals Senator Paul Sarbanes and U.S. Representative Michael Oxley sponsored a bill that is now known as The Sarbanes-Oxley Act of 2002. They refer to this bill as the SOX act. The reason this law was passed was to help eliminate the fraudulent activity that was taking place within the companies that are traded publicly in the United States. The Sarbanes-Oxley Act of 2002 holds those individuals accountable for unethical acts and behavior. This act makes it so that companies are now required to provide an accurate balance sheet that is deemed verifiable. Accounting practices of businesses are now more transparent and this is due to the Sarbanes-Oxley Act of 2002. This act ensures all businesses have true and correct financial statements (Sox Law, 2006). Unethical practices and or behavior in accounting would be described as any act that knowingly is taking away from profitability of a business. The examples are as follows: falsely reporting financial statements, stealing, and inputting data incorrectly. In order to control the unethical behavior taking place in the workplace, companies can implement internal controls measures. These are checks and balances that will ensure accurate reporting of information. Many organizations utilize the internal controls system to ensure employee honesty. Internal controls also maintain productivity for their employees...
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...Organization’s financial and business policies and procedures are classified as Internal Controls. These controls consist of all measures by providing protection for the organization by ensuring accurate and reliable data, securing policies and evaluating performance. By providing Internal Control this information they can protect the assets of the organization from fraud, theft or any other criminal activities. Internal Control also enhances the financial records by reducing errors and regularities from either unintentional or intentional practices. Every organization big or small should have Internal Controls safeguarding their every move in the business world. In 2002, Senator Paul Sarbanes (D-MD) and Representative Michael Oxley (R-OH) composed an act, Sarbanes-Oxley Act (SOX), which then was signed by President George W. Bush in July. The SOX is compiled of eleven titles and a set number of non-negotiable deadlines for companies to adhere to. SOX was created to protect investors from the large amount of scandals and bankruptcies in 2000. Companies like Enron, Tyco International, World Com and Adelphia collapsed which cost investors billions of dollars. With SOX the investors would have not lost as much but they still would have lost some. Sox just insure that the financial records are accurate and reliable for investors to see how the companies are doing if they chose to invest in them. SOX is only applicable to publicly traded companies, but some states are pushing...
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...Sarbanes-Oxley Act.2002 Darrell Kelley LAW/412 June 27,2013 Mark Reed Sarbanes-Oxley Act.2002 In this essay one will be discussing Enron, the illegal activity of Enron and the establishment of the Sarbanes-Oxley act 2002. Also one Discusses the ethical views in todays business world and the criminal penalties that the Sarbanes-Oxley Act provides Enron was an American energy business in commodities and services company based out of Houston, Texas. Enron was a rapid growing corporation that organization goal was in producing natural gases, communications, electricity, pulp and paper with was once believed to have had employed approximately over 18,000 employees (Frontain). With monopolizing in such resource ventures Enron was once believed to have made well over 100 hundred billion dollars in revenue. In the height of Enron’s success of banking in million of dollars through out their empire there were also faulty accounting be done internally. Thousand to millions of dollars being signed off to hire up E of the company leading to questioning of the money (Frontain), account scandals and audits. By the early 2000’s Enron was in over their head in fraudulent financial documents, having less than enough funds to payback what was owed, as well keeping employees on payroll Enron made the move of filing bankruptcy leaving whatever ethical, moral responsibility they have had abandoned. With Enron’s fraudulent financial secrets and bankruptcy being brought...
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...Adelphia Communications Corporation was a cable company, whose owners, John Rigas and his son Timothy,” were charged with bank fraud, securities fraud, and conspiracy.” (Reference #4) They were charged with all fifteen accounts of securities fraud. Another son of his was acquitted, as well as the former treasurer, Michael Mulcahey. “John and Timothy now face 30 years in prison because of the bank fraud charge.” (Reference #4) “They were charged with hiding over $2.3 billion dollars’ worth of debt in the company,” (Reference #4) as well as stealing from there investors. John became so greedy with the money he was taking, that his son became worried about it and tried to limit him to only taking out one million a month. The prosecution had two witnesses that they used in order to bring down the Rigas’, and they were Adelphia executives, James Brown and Karen Crosniak. They testified and tried to say that they weren’t aware of what they were doing, but ignorance of the law doesn’t mean you can get away with what you do. The effects of what they did have impacted the company so much that they had to move to a new location, and they operate under bankruptcy protection. There are many ethical issues that pertain to this issue, as well as many laws that were broken. First, what some call “creative accounting”, this is when a company tries to do something with their accounting reports to make the company look very profitable so that they can attract new investors. This is...
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...theorld of financial accounting Sarbanes and Oxley or SOX is one of the most important pieces of legislation passed in this decade or even in the history of financial accounting. Sarbanes and Oxley brought about major changes in financial accounting which allows for more regulation of the accounting profession. It took Accounting form being looked at as a numbers game and placed more importance on the communication aspect of the profession. This essay will focus on Sarbanes and Oxley and its impact on the accounting profession as a whole. How can one piece of legislation weigh so heavily on a profession? To answer that question one has to look at the impact Sarbanes and Oxley has had on the practice of public accounting. Prior to Sarbanes and Oxley the regulation of public accounting was done internally, through organizations such as the SEC. However with the passage of Sarbanes and Oxley the profession was given an overhaul making companies more accountable. Sarbanes-Oxley was established to improve the quality and transparency of the financial statements issued by public companies. With that purpose in mind Sarbanes-Oxley developed a new board to oversee how financial statements are audited according to independent standards, the Public Company Accounting Oversight Board. This changed the game. It decreased the chance of companies falsifying financial statements, mainly because of the threat of penalties and imprisonment. In addition Sarbanes and Oxley have had a cascade effect...
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