...The Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 The Act & Impact ACC 410, Jackie Lewis, Ph.D. Abstract The Sarbanes-Oxley Act, officially named the “Public Company Accounting Reform and Investor Protection Act of 2002”, is recognized to be the most noteworthy U.S. federal disclosure and corporate governance legislation since the Securities Act of1933 (the Securities Act) and the Securities Exchange Act of 1934 (the Exchange Act). Furthermore, the provisions of the Act are momentous enough that it is considered by many to be the most significant change to the federal securities laws in the U.S. since the New Deal. The Sarbanes-Oxley Act of 2002 The Act & Impact The Sarbanes-Oxley Act of 2002 was signed into law following the wake of corporate financial scandals. Many large companies such as Enron, WorldCom, and Arthur Anderson were affected. The Act provides a solid set of government rules that are aimed to discourage and punish corporate and accounting fraud, as well as corruption. SOX is designed to carry out these tasks by imposing severe penalties for wrong doings, while protecting the interest of workers and shareholders. The stated purposed to protect investors is maintained by improving the accuracy and reliability of corporate disclosures, imposing strict rules for audits and auditors of publically traded companies, preventing insider trading and deals, requiring companies to adopt strict internal controls, and increasing the penalties...
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...Article Review: Sarbanes-Oxley Act of 2002 Melissa Adams LAW/421 October 16, 2014 Mrs. Lydia Quarles Article Review: Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act (SOX Act) of 2002, passed by the United States Congress with the intention of protecting investors from fraudulent activities experienced by business entities or corporations. The enactment of the SOX Act happened at a time when various scandals such as Tyco, Enron, and WorldCom affected the confidence of investors. Indeed, the SOX Act is about regulatory measures that are essential for purposes of protecting the welfare of investors. It is important to note that the business environment in today’s world require the investors to make proper decisions so as to survive in the current competitive global market. The process of making decisions governed by various ethical attributes key among them being integrity, transparency, and accountability. Ethical Decision The SOX Act has the effect of ensuring that investors’ confidence improves through the existence of regulatory provisions that are effective in enhancing ethical standards. “The Supreme Court must determine if the Sarbanes-Oxley Act of 2002 violates the Constitution’s separation of powers framework by assigning too much power to the Public Company Accounting Oversight Board without providing any residual control power to the President to supervise the Board” (Balasanian & Chu...
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...The Sarbanes-Oxley Act of 2002 Presented by: Ibrahim M. Conteh; Ruby Proctor Garcia; Kathleen M. Parry; Joseph M. Schmerling; Jaime Ulloa Auditing Theory and Practice 0902 ACCT422 4021 Due: April 29, 2009 Table of Contents Page Number What is the Sarbanes-Oxley Act of 2002? 3 Why was SOX established? 4 When did SOX take effect? 5 What companies were affected and how? 6 What does SOX compliance require? 9 Conclusion 11 References 13 What is the Sarbanes-Oxley Act of 2002? The Sarbanes-Oxley Act of 2002 – its official name being “Public Company Accounting Reform and Investor Protection Act of 2002” – is recognized to be the most significant U.S. federal disclosure and corporate governance legislation since the Securities Act of 1933 (the Securities Act) and the Securities Exchange Act of 1934 (the Exchange Act), and, the provisions of the Act are significant enough that it is considered by many to be the most significant change to federal securities laws in the U.S. since the New Deal. It is best understood, however, not as a piece of legislation centered on a new concept of regulation, but as a process which mandated that many major reforms be implemented as soon as possible (in some cases, within 30 days) on the precise schedule specified by Congress. In that sense, the Enron and WorldCom debacles provided the impetus of public outrage that...
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...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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...SARBANES-OXLEY ACT OF 2002 1 Introduction The Sarbanes-Oxley Act was passed in 2002 because of corporate scandals involving fraud and regulatory mismanagement in companies such as WorldCom and Enron. These companies went bankrupt after giving misleading or false financial reporting that indicated they were more financially healthy than they actually were. For example, Enron deliberately misrepresented significant percentage of transactions to government auditors in an attempt to conceal massive losses. Senator Paul Sarbanes and Representative Michael Oxley proposed the Act to strengthen corporate governance and accountability and prevent this type of fraud. The Act dictates how all public corporations are required to disclose financial information. It regulates the activities of management and executives in addition to accounting and auditing firms that provide services to public companies. U.S. publicly-traded company can face severe penalties if they do not follow the laws outlined by the Sarbanes-Oxley Act. The purpose of this paper is to describe the main aspects of the regulatory environment which will protect the public from fraud within corporations by paying particular attention to SOX requirements. In addition, this paper will also explicitly evaluate whether SOX will be useful in avoiding future frauds. The Sarbanes-Oxley Act consists of eleven titles. However, the...
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...Sarbanes Oxley Act of 2002 Daniel Alvalle BUS 670 Legal Environment Instructor: Peter McCann 7/29/2013 If you were an investor would you want your money protected? Would you be skeptical about investing in companies since the securities fraud scandals that have happened recently? The answer is most likely, “yes”, to a certain degree. With the news about unethical business practices and companies not following regulatory guidelines, it is difficult to ignore the risk that is involved with trusting someone else with your investment. But there is an answer to help protect companies and shareholder, and it comes in the form of a regulatory organization that was put in place in 2002. That was put in place as a direct response to the corporate scandals of Enron and other scandals that followed, and was also put in place to help restore confidence in the financial market. SOX-Applies only to US companies on the US exchange, and is an Act put in place in 2002 to mandate all publicly traded corporations to maintain adequate internal control. SOX basically make sure that all US publicly traded corporation do what is in the best interest to protect the investment of stockholders. SOX-Sarbanes-Oxley Act of 2002 is an ACT that was put in place where all publicly traded U.S. corporations are required to follow certain guidelines and requirements. Basically, these systems were put in place because of securities fraud issues that came to light in the early 2000’s, and are...
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...Student Imed Baghdadi Business Economics GM 545 Professor: Ramiro Serrano Question #15 Chapter 7 the Sarbanes-Oxley Act of 2002 One of the primary aims of the Sarbanes-Oxley Act of 2002, the New York Stock Exchange, and the NASDAQ corporate governance proposals is to improve the reporting systems for publicly traded companies. Many of the exchange proposals redefine the composition and duties of firms' boards of directors and their compensation and nominating committees. Sarbanes-Oxley places new duties on audit committees and provides oversight and restraints on public accounting companies. Recent financial reporting scandals and the loss in market values weakened shareholder confidence in the financial accounting system. In response, the NYSE and the NASDAQ proposed increasingly stringent independence requirements, both for overall board membership and for the compensation and nominating committees. Congress passed the Sarbanes-Oxley Act, a group of amendments to existing securities laws intended to strengthen corporate governance and the financial reporting system. These proposals and laws augment existing exchange requirements for listed firms to have independent audit committees. When costly internal regulations that are not necessary for honest corporations are imposed on all corporations that are competitors, honest corporations do not gain a competitive advantage over those who have violated the law. In some situations these honest corporations could bear higher...
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...Sarbanes- Oxley Act of 2002 The Sarbanes-Oxley Act has many different effects of interest to financial service professionals in the business world. This act increase the reliability for financial statement information that financial specialist can use to get a better understanding of the financial picture of the company. Also Sarbanes-Oxley helps financial professionals look into certain conflicts of interest in companies involved in security research and investment banking. The Act mandates disclosure by the securities analysis and increase reliability for analysis recommendation. The Sarbanes-Oxley Act could prove reliability of financial statements and financial analysis even more in the future aspect of business with the growth of technology. The Sarbanes- Oxley Act of 2002 will give companies a better understand of why it’s important for the regulations and guidelines to be followed by due to increase reliability of financial statements and additional studies with potential impact. Increase Reliability of Financial Statements The Sarbanes-Oxley Act provides increase in monitoring accountants and auditors which also regulate the activities of investment bankers, investment analysis and securities researches. New rules for the Act are always in question but the breaking of the original rules leads to audit failures. The Act continues to improve the reporting of financial statements in many different ways for example the creation of the Public Accountancy Board. The...
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...THE SARBANES OXLEY ACT of 2002 The Sarbanes Oxley Act of 2002 was signed into law after a series of corporate financial scandals affected companies such as Enron, WorldCom, and Arthur Anderson. It provides a solid set of government rules that will discourage and punish corporate and accounting fraud and corruption by imposing severe penalties for wrongdoers, while protecting the interest of workers and shareholders. Acknowledged as the most significant change to securities laws since 1934, the Sarbanes Oxley Act, a new penal law, 18 U.S.C. $1348, became effective on July 30, 2002. The Act contains reforms for issuers of publicly traded securities, corporate board members, auditors, and lawyers. It was designed to improve the quality of financial reporting, accounting services, and independent audits (Zameeruddin, 2005). The provisions of the act apply to U.S. companies that are required to file annual reports with the Securities and Exchange Commission (SEC) as well as foreign companies that that are listed in the U.S. or are obligated to report to the SEC periodically. Title I of the Sarbanes Oxley Act stipulates that a new Public Company Accounting Oversight Board will be appointed and overseen by the SEC. The Board, which is made up of five full-time members, will oversee and investigate the audits and auditors of public companies and penalize for violations of laws, regulations, and rules. It is funded by fees to be paid by all public companies...
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...Sarbanes-Oxley Act of 2002 Andrea Kelley ACC/561 Professor Melinda Gregg November 9, 2015 Introduction A regulatory agency is a representation of a governmental body, which is produced by a legislature. Regulatory agencies are implemented to enforce laws of legislative functions, executive functions, and judicial functions. The regulatory agencies plays a central role in the operation of the financial sector. There are a numerous variances of regulatory agencies, which all serve a different purpose in business law enforcement. Some of which include the Environmental Protection Agency, Occupational Health and Safety Administration, and the Securities and Exchange Commission. For the purpose of this paper, a description of the Securities and Exchange Commission will be given. Further describing the regulations which will protect the public from fraud within corporations and what that represents in the Sarbanes-Oxley Act of 2002. The Securities and Exchange Commission The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation (SEC.gov, 2013). The SEC is the regulatory agency which governs securities markets and protects investors. It is a regulatory agency which oversees securities transactions, activities of financial professionals and mutual fund trading to prevent fraud and intentional deception (SearchFinancialSecurity.com, 2015). The SEC is composed of five commissioners...
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...Sarbanes-Oxley Act of 2002 ACC/561 Sarbanes-Oxley Act of 2002 Following a number of discovered fraud scandals committed by well-known corporations and in order to restore public confidence in the stock market and trading of securities, the United States congress passed the Sarbanes-Oxley Act in the year 2002. As a result of the act endorsement by the New York Stock Exchange and the Securities and Exchange Commission, among many other national overseeing committees, a number of rules and regulations were proposed and adopted and that demanded new processes and programs be instilled for ensuring compliance with the requirements of the new law. The new rules and regulations pertaining to the enacted law have a common goal: 1. Pass accountability and responsibility of the accuracy and truthfulness of financial statements directly to the executives and board members of a company or corporation 2. Increase transparency of corporate accounting and performance record reporting 3. Business reporting ethics to be emphasized with in-place steps and procedures adopted to detect and prevent any type of fraud or manipulation of stakeholders for private benefit. Traditionally, preparation of a company’s financial statements including day-to-day management of the company has been the responsibility of the board of directors and upper management team of the company. The new law clearly rests the responsibility for accuracy and truthfulness of the published financial records on...
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...Sarbanes-Oxley Act of 2002 Bus 102 – Dr. Sean D. Jasso John Chi 12/9/2010 Table of Contents - Table of Contents Introduction History of the Act Implementation Impact on Business Policy Analysis Conclusion Appendix References pg. 1 pg. 2 pg. 3 pg. 4 pg. 7 pg. 9 pg. 11 pg. 12 pg. 14 1|P a ge Introduction Corporate Scandals are business scandals that initiate from the misstatement of financial reporting by executives of public companies who are the ones trusted to run these organizations. Corporate scandals are derived in many ways and these misrepresentations happen through overstating revenues and understating expenses, overstating assets and understating liabilities, and use of fictious and fraudulent transactions that gives a misleading impression of the company’s financial status. There were a few corporate scandals that took place in the last decade that forever changed investment policies in corporate America. The companies that are most commonly known for these scandals are Enron, Adelphia, and WorldCom. These companies had hidden their true financial status from creditors and shareholders until they were unable to meet the financial commitments which forced them reveal massive losses instead of the implicated earnings. The ultimate result cost investors billions of dollars when the share prices of the affected companies had collapsed. According to Hopwood, Leiner & Young (2002), pg. 130, “the public outcry from the corporate scandals were enormous...
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...The Sarbanes-Oxley Act of 2002 Hung Pham ACC100 Professor Joan Harrison 3/10/2011 Auditing is a professional job that existence of it depends on the virtue of practice in order to serve the interests of the community. There are some idea that have discuss the role of audit professional ethics and the need to establish a mechanism to monitor compliance with ethical standards as well as violations of judicial ethics. Of these, the author continues to discuss the regulations on professional ethics for auditors. The provision on professional ethics for the audit practice is formed by the relationship between professional and social environment. The ethics provisions commonly found in the standards of professional ethics and regulations of the law. Although they both refer to ethics issues, but how to promulgate and content differences. In the U.S., the auditing standards and professional ethical standards by professional organizations audit (AICPA) issued and fully control the quality by professional organizations to undertake. Self-control model derived from the operation causes the independent auditors the United States has flourished, and very soon because the economy is funded by the stock market. The growths of audit activities from the absence of state regulations have led to the formation and development of strong professional organizations. Until the 2000s, a number of financial scandals and accounting outbreak led to the collapse of the leading companies...
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...In this paper the author will describe the main aspects of the regulatory environment which will protect the public from fraud within corporations. The author will pay special attention to the Sox requirement; along with evaluating whether Sox will be effective in avoiding future frauds. Regulatory environment consist of several laws and regulations that has been developed by federal, state, and local governments in order to limit control over business practices. The regulatory environment plays an important role in the positive operation of the financial sector and in the efficient management and integration of capital flow and domestic savings. “The value of the claims of financial institutions on borrowers is dependent upon the certainty of legal rights, coupled with the predictability and speed of their fair and impartial enforcement. Legal and regulatory frameworks that empower the regulator and govern the conduct of market participants form the cornerstone of the orderly operation and development of the financial sector” (Making Finance Work for Africa, 2012). Regulatory compliance has always been a part of doing business. In almost all industry there are a variety of governments and industry regulations that they company must follow in the way that they conduct their business and the penalties of not following the regulations are clearly defined within the company (Doculabs White Papers, 2012). There are many regulations that has been around for a long period of time...
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...2009, p. 15). For businesses such as WorldCom, Adelphia and Sunbeam, this greed resulted in fraudulent accounting activities that left shareholders vulnerable and left the public untrusting of company financial reporting. High-profile company scandals such as these beg the question of whether ethical practices were properly in place for public protection against such greed. After the infamous Enron scandal, the United States government felt it was time to enforce its authority and passed the Sarbanes-Oxley Act of 2002 in hopes of “combating fraud, improving the reliability of financial reporting, and restoring investor confidence” (Wagner and Dittmar, 2006, p. 1). The purpose of this paper is to highlight the benefits of the Sarbanes-Oxley Act of 2002 in terms of corporate accounting practices and provide analysis on how the Sunbeam scandal would have been affected by this act. Benefits of the Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act (SOX) was enacted on July 30, 2002. The most significant contribution was the initiation of the Public Company Accounting Oversight Board (PCAOB). Subject to the Securities and Exchange Commission (SEC) oversight, the PCAOB was created to “oversee the independent auditors of public companies, replacing a self-regulatory scheme and mandating true independence” (Maleske, 2012, p. 4). This encourages corporate transparency of financial reporting by implementing and sharing the results of audits and employing the independence of auditors...
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