Premium Essay

Sox Regulations

In: Other Topics

Submitted By danikagrace
Words 3586
Pages 15
The Impact of Sarbanes-Oxley Act of 2002 on Accounting and Finance Departments

Danika Grace Brown

Lakeland College Kellett School of Business – BlendEd
BA 772 Advanced Industrial Accounting II

Instructor Mary Diederich
March 10, 2015

Table of Contents Abstract 2 Overview of the Sarbanes-Oxley Act of 2002 3 About SOX 4 Reporting and Compliance 5 Risk Assessment and Control 6 Interview at Company X 7 Standards for Corporations and Officers 8 Auditing and Financial Reporting 9 Future Impact of SOX 10 Conclusion 11 References 13

Abstract

Sarbanes-Oxley is the response from Congress in regards to the financial industry collapse that happened over a decade ago. Due to unethical reporting from corporations, Sarbanes-Oxley (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. As a result of SOX, top management must individually certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. Furthermore, SOX increased the oversight role of boards of directors and the independence of the outside auditors who review the accuracy of corporate financial statements. This paper will look to provide an oversight of the law and how it pertains to the standards in Accounting and Finance departments nowadays. In addition, this paper will also touch on the ongoing costs and benefits of the now standard regulations. An interview with the Accounting and Finance managers will cover the provisions that employers have had to put into place to comply with those regulations.

Overview of the Sarbanes-Oxley Act of 2002

The devastating collapse of prestigious United States’ financial institutions in 2001 has ushered in a paradigm shift in financial accountability; and highlighted the overall...

Similar Documents

Premium Essay

Corporate Governance

...In part I, I conclude the arguments of Robert Prentice and Lawrence Mitchell who are favor of more regulation and what their views are to the legislation and regulations, while in Part II I concludes the arguments of Roberta Romano and Stephen Bainbridge who think more regulations are of improper and “quackery”. Part III is about a more detailed examination for different regulations and arguments as I concluded in part I and part II. If certain regulations are well executed, it should not only benefit the corporations and their shareholders but also the entire stock market. I: There should be more regulations Empirical evidence The purpose of corporate governance is to make significance for the health of American business; so there came the Sarbanes-Oxley Act of 2002 (SOX). According to Robert Prentice, he points out that SOX made the market a rapid recovery as it emphasizes on the transparency of corporations....

Words: 2409 - Pages: 10

Premium Essay

Sarbones Oxley and Its Implecation

...Coates, professor of Harvard law & economics school analyzed the pre and post Sarbanes Oxley era and the pros and cons of the SOX legislation. In addition, he recommended that by reconstituting governance and accountability of PCAOB, implication of Sarbanes Oxley can be more effective to safeguard net long term socioeconomic market gain. While discussing about the enforcement in pre Sarbanes Oxley era, Coates pointed out the previous laws and regulations lacked effective implementation of corporate governance. With the threat of systematic corporate misstatements, frauds and rise in significant class action suits, in the pre SOX era investors’ confidence were dramatically declining. As in such scenarios in last decade, Coats describe the core goals on which SOX were formed. First, on its core, “SOX legislation was designed to fix the auditing of U.S public companies.” Second, Sarbanes Oxley was predominantly designed to regulate the “deprofessionalization” of auditors as there was significant number of audit failure by top audit firms.[Coates 93, 2007] He marked several reasons behind the failure of auditing...

Words: 2150 - Pages: 9

Premium Essay

Sarbanes Oxley Act Review

...Sarbanes Oxley Act Article Review Amber Means LAW 421 November 24, 2014 Jane Schneider Sarbanes Oxley Act Article Review Corporate fraud and mismanagement scandals in publically held companies, along with the public outcry for stricter regulations and accountability in early 2000 led to the passing of the Sarbanes-Oxley Act (SOX Act) of 2002. The primary purpose of the SOX Act is to overhaul the structure of corporate governance regulatory structure and impose stricter regulation and controls on the auditing, financial reporting and internal corporate governance procedures of corporations (Melvin, 2011). Significant portions of the Act are aimed towards creating solutions for specific failures in the auditing and accounting procedures of publically held companies. The Act also increased the jurisdiction, enforcement alternatives and enforcement budget of the U.S. Securities and Exchange Commission (SEC) substantially (Melvin, 2011). The SOX Act of 2002 was implemented to effectively end corruption within publically held companies and restore the faith of investors in the corporate system, but how well is it working? The following is summary of the article “Sarbanes-Oxley Act 2002 (SOX) – 10 years later” which discusses the intentions of the SOX Act, the corruption and legislative environment which led to its implementation, and how its implementation has affected corporations and investors....

Words: 1144 - Pages: 5

Premium Essay

Sarbanes-Oxley: Benefits vs. Costs

...Costs The American Competitiveness and Corporate Accountability Act of 2002, commonly referred to as the Sarbanes-Oxley Act (SOX) was enacted in response to corporate financial scandals involving companies such as Enron, WorldCom, and Tyco International. While SOX was written specifically for public companies; a few provisions, including whistleblower protection and document retention apply to all companies and nonprofit organizations (Levy, 2009). The stated purpose of the SOX legislation is “to protect investors by improving the accuracy and reliability of corporate disclosures” (Martin & Combs, 2010). SOX requires additional internal monitoring and disclosure of internal accounting control practices. SOX also mandates that CEOs and CFOs personally certify accounting disclosures. Ultimately, SOX was designed to increase accountability and transparency in an effort to restore investor confidence. While SOX has been effective since its enactment, many question whether the benefits outweigh the costs. Major Provisions SOX includes over 60 separate sections, including several significant provisions (H.R. 3763). Section 101 created the Public Company Accounting Oversight Board (PCAOB) to oversee SOX and public accounting firms. Oversight is critical to the successful implementation of SOX requirements. Section 203 requires the lead audit or coordinating partner and the reviewing partner to rotate off the audit every five years....

Words: 1502 - Pages: 7

Premium Essay

Sarbannes Oxley Act of 2002

...Triggered by investigations into corporate fraud by some of the largest and most successful corporations in the world, SOX would be marketed as the antidote to the epidemic of corporate corruption; that is until the financial crisis of 2007-2010. The purpose of SOX was to prevent and detect fraud in financial statement reporting, increase corporate transparency and accountability, as well as restoring the public’s confidence in the stock market. Has SOX had an impact on ethical financial...

Words: 3735 - Pages: 15

Premium Essay

Sarbanes Oxley Cost Benefit Analysis

...The Sarbanes Oxley Act (SOX) ordered a number of reforms to enhance corporate responsibility, financial disclosure, and to fight corporate and accounting fraud. This regulation also put financial as well as criminal pressure on the perpetrators, including the auditors. The Sarbanes Oxley Act (SOX) was named after two of its main architects, Senator Paul Sarbanes and Representative Michael Oxley. The SOX Act is composed of eleven titles. They are: Public Company Accounting Oversight Board, Auditor Independence, Corporate Responsibility, Enhanced Financial Disclosures, Analysis Conflicts of Interest, Commission Resources and Authority, Studies and Reports, Corporate and Criminal Fraud Accountability, White Collar Crime Penalty Enhancement, Corporate Tax Returns, and Corporate Fraud Accountability. This Act requires that top management assume responsibility for the financial records that are put out by the corporation. The have to sign off on the information before it is released. This is covered in Section 302. They are certifying that the report does not contain material untrue statements and that the statements provide a fair picture of the financial condition of the organization. This Act also put in place very large penalties for violation any of the rules of this regulation. This is covered in Section 802. Section 802 states that it can impose penalties of fines and/or up to 20 years imprisonment for altering or falsifying records....

Words: 1558 - Pages: 7

Premium Essay

The Impact of the Sarbanes Oxley Act on Corporate Governance

...Literature Review: An Overview of Corporate Governance ..................................... 6 2.1 United Kingdom ........................................................................................ 14 2.2 Self-regulation prior to SOX ..................................................................... 18 3. Literature Review: The SOX Act ................................................................ 19 3.1 Enron, the trigger to SOX? ........................................................................ 22 4. The Sarbanes Oxley Act: Radical Reforms in Key Areas ....................................... 26 4.1 Establishing the Public Company Accounting Oversight Board (PCAOB) ......................................................................................................................... 26   1   Student  ID:  082168461   4.2...

Words: 17258 - Pages: 70

Free Essay

The Sabranes-Oxley Act

...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. Monitoring of Controls is in direct relation to title I, section 103 of SOX -Auditing, Quality Control, And Independence Standards And Rules. It states the requirements for internal and external auditing quality control regulations, and ethics standards (n.d., 2002). Information systems are in place so that those in command need “accurate information to keep track of assets...

Words: 448 - Pages: 2

Free Essay

Government Regulation in the Accounting Industry

...Running Head: GOVERNMENT REGULATION IN THE ACCOUNTING INDUSTRY Government Regulation in the Accounting Industry Rebecca Gregory Kaplan University Outline Introduction Securities Acts of 1933 and 1934 • Brief History of the Securities Act of 1933 • Objectives of the Securities Act of 1933 • Summary of the Securities Act of 1933 • Necessity of the Securities Act of 1934 • Summary of the Securities Act of 1934 • Peat Marwick Fraud/Scandal The Foreign Corrupt Practices Act of 1977 • Brief History of the Foreign Corrupt Practices Act of 1977 • Summary of the Foreign Corrupt Practices Act of 1977 • Kellogg Brown & Root LLC Fraud/Scandal Sarbanes Oxley Act (SOX) • The Purpose of SOX • Summary of SOX • US Bank of Seattle Fraud/Scandal Conclusion Government Regulation in the Accounting Industry The Great Depression and the Crash of 1929 led the United States into the beginning of new regulations. The first of these regulations was the Securities Act of 1933, which had a goal of prohibiting deceit, misrepresentation, and fraud in the sale of securities. The abusive practices of many banks and Wall Street firms resulted in the creation of the Securities and Exchange Commission (SEC) in 1934. It was established by The Securities Act of 1934 and gave the SEC power to monitor the sale of securities in the U.S....

Words: 2860 - Pages: 12

Premium Essay

Case Study: a Primer on Sarbanes-Oxley

...The Sarbanes-Oxley Act of 2002 (SOX) was passed by the 107th Congress on July 30, 2002 (Sarbanes-Oxley, 2002) to provide protection to investors and shareholders as a result of fraudulent activities by some U.S. Corporations such as Enron, Tyco, WorldCom, and Adelphia, as well as other public companies (Jennings, 2012; Scott & Nganje, 2011). SOX introduced major regulatory changes which affect financial practice and corporate governance; and compliance is mandatory for ALL organizations (Guide to Sarbanes-Oxley, 2006). SOX is actually Public Law 107-204 and it is divided into eleven different parts, each one addressing a different ethical issue or activity of corporate practice (Sarbanes-Oxley, 2002). SOX has other more formal names such as “the Investor Confidence Act, the Public Accounting and Corporate Accountability Act, Public Company Accounting Reform and Investor Protection Act of...

Words: 2048 - Pages: 9

Free Essay

Check This Out

...THE EFFECTS OF THE SARBANES-OXLEY ACT AND CANADIAN EQUIVALENT, BILL 198/CSA RULES, ON CANADAIN CROSS-LISTED STOCKS Abstract Following the Sarbanes-Oxley Act of 2002 (SOX), Canada subsequently implemented similar SOX-type rules on Canadian firms by enacting Ontario Bill 198 and the enforcing several of the Canadian Securities Administrators’ (CSA) rules. This paper tests the impact of the Canadian equivalent, Bill 198/CSA rules, on Canadian firms listed on the Toronto Stock Exchange. First, we examine the effects of SOX on cross-listed Canadian firms and second, we test the impact of Bill 198/CSA rules on Toronto Stock Exchange (TSX) stocks. Using a matched sample approach, the results indicate that after controlling for some relevant cross-sectional factors, SOX had negative...

Words: 11274 - Pages: 46

Premium Essay

Sarbanes Oxley Act of 2002

...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 put in place to help minimize and eliminate fraud, to ensure accurate record keeping and reporting as well as to protect investors (Kimmel, Paul D. (2011-06-28). One key component is a Code of ethics requirement which provides a guideline for internal corporate governance. These standards outline standards for corporate Officers, Directors, employees, and even its internal auditors....

Words: 2407 - Pages: 10

Free Essay

Sarbanes-Ox Analysis

...The Sarbanes-Oxley Act, (SOX), of 2002 was an attempt to address several violations to the public trust from corporations that continued to occur despite the previous attempts to govern corporate responsibility to the public. This act specifically tried to reduce unethical corporate behavior and increase public confidence in the financial reporting of corporations (Kimmel, Weygandt, & Kieso, 2011). This paper will address if the requirements of SOX will be enough to prevent future fraud in the corporate environment. Regulatory Environment Several laws and regulations have been developed to attempt to control business practices. Corporations must follow rules that were established to protect the public from fraud such as fair practice laws, and regulatory agencies must ensure compliance with these long-standing regulations. The U.S. Securities and Exchange Commission, (SEC), “was developed to help protect investors, maintain fair, orderly, and efficient markets, and facilitate capital information” (U.S. Securities and Exchange Commission, 2015). The SEC was created in 1934 in response to the loss of public confidence in financial markets after the stock market crash of 1929 and the years following the Great Depression. The main goal of establishing the SEC was to restore investor confidence in the markets by providing more precise and reliable information for investors and creating an environment that protected the investor first....

Words: 1264 - Pages: 6

Premium Essay

Week 2

...Sarbanes – Oxley Act (SOX) became law in the year 2002. This act was proposed and created by a Paul S. Sarbanes, United States Senator and Michael G. Oxley, United States House of Representative. The purpose of the act was to bring transparency to gain investors’ confidence (CPA Journal, 2008, Pg. 16 p.1). The SOX Act is a complex law that includes several regulations, procedures, and penalties for fraudulent financial practices and reporting. In 2008 U.S. Senator Paul S. Sarbanes was interviewed by a journalist of CPA Journal and during the interview he state the following, “ We tried to create a framework that supports individuals who want to do things honestly, and identifies and penalizes those who cheat and cut corners” (CPA Journal, 2008 Pg.17 p. ix). During the first five years after the creation of the law, several companies showed resistance adopting the financial procedures and reporting provided by legislators in the SOX Act. After thirteen years from the enactment of the law there still criticism arising from several sections included in SOX Act. This paper will discuss the negative and positive views towards the SOX Act, the discussion will determine the efficacy of the law in avoiding future frauds. Sarbanes–Oxley Act negative views Strong criticism come from Small businesses since the financial reporting and audit requirements included in the law are extremely costly for small companies....

Words: 1215 - Pages: 5

Premium Essay

Section 404 of the Sarbanes-Oxley Act - Curse or Blessing

...The main premise of this paper is to investigate one of the most challenging aspects of SOX’s regulations - a company’s responsibility for implementing effective internal control – as described in Section 404. Role of the Internal Control in the Financial Reporting and Section 404 The requirements of the...

Words: 2712 - Pages: 11