...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...
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...to Sarbanes – Oxley Act of 2002 The Sarbanes – Oxley Act of 2002, also known as the Public company accounting reform and Investor Protection Act of 2002 and commonly called SOX or Sarbox is a United States federal law passed in response to a number of major corporate and accounting scandals including those affecting Enron and WorldCom. The Act establishes a new quasi-public authority, the Public Company Accounting oversight Board for overseeing, regulating, inspecting and disciplining accounting firms in their roles as auditors of public companies. The Act covers issues such as auditor independence, corporate governance and enhanced financial disclosure. Major Provision of Sarbanes – Oxley Act of 2002 The Sarbanes Oxley Act of 2002 established corporate accountability and civil and criminal penalties for white – collar crimes. This act is a United States federal law passed in response to a number of major corporate and accounting scandals including those effecting Enron, Tyco and WorldCom. These scandals resulted in a decline of public trust in accounting and reporting practices. This Act provides regulatory bodies and courts to take various actions – civil and criminal proceedings in connection of misstatements amounting to accounting scandals and fraudulent financial reports, other frauds on securities matters, obstruction of justice and retaliating against corporate Whistleblowers. The Act also enforce tougher civil and criminal penalties for fraud and accounting scandals...
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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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...Comply with Sarbanes-Oxley Act Nguyễn Phước Đại dnguyen0191@student.bristoluniversity.edu Bristol University BUS 555: Business Ethics 10/16/2013 Comply with Sarbanes-Oxley Act Cynics sometimes like to say that locks on doors only keep honest people out, and the same is often true for accounting rules and regulations. We only trust financial statements from honest companies. Hefty penalties for violating the rules may act as curb for executives who are considering whether to play with their numbers. Accounting frauds most often stem from two conditions: lack of transparency and conflicts of interest1. The string of corporate scandals since the beginning of the millennium has taken its toll on investor confidence. Because reliance on corporate boards to police themselves did not seem to be working, Congress passed the Public Accounting Reform and Investor Protection Act of 2002, commonly known as Sarbanes-Oxley Act, which enforced by Securities and Exchange Commission (SEC). (Hartman, L., DesJardin, J. 2011, p426) The collapse of Enroll, WorldCom, accounting frauds at Tyco and the passage of Sarbanes-Oxley have forced boards of directors, particularly at publicly-traded companies, to reassess how they do acquisition deals and on what basis they can represent to the shareholders that the deal is fair to all parties. (Andrew J. Sherman & Milledge A. Hart 2006, p87) In business there is one simple rule: grow or die. Companies on a growth path will...
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...Sarbanes–Oxley, Sarbox or SOX, is a United States federal law which was introduced in 2002. It is also known as the “Public Company Accounting Reform and Investor Protection Act” and “and 'Corporate and Auditing Accountability and Responsibility Act”. The main objective of the act is to protect investors by improving the accuracy and reliability of corporate disclosures. New aspects are created by SOX act for corporate accountability as well as new penalties for wrong doings. It was basically introduced after major corporate and accounting scandals including the scandals of Enron, WorldCom etc so that the same kind of scandals do not repeat again. There are 11 titles on the act. Each title consists of several sections. The Securities and Exchange Commission needs to implement rulings on the requirements to comply with the law. These major elements are- 1. Public Company Accounting Oversight Board: This title establishes the Public Company Accounting Oversight Board. It provides specific processes and procedures for compliance audits, policies for control purposes. Basically it provides an oversight of public accounting firms that do auditing. 2. Auditor Independence: It provides standards for external auditor independence, so that conflicts of interest can be minimized. It also mentions the requirements for appointing new auditor and auditor reporting requirements. Auditing companies are prohibited from providing non-audit services (consulting) for the clients for...
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...Sarbanes–Oxley, Sarbox or SOX, is a United States federal law which was introduced in 2002. It is also known as the “Public Company Accounting Reform and Investor Protection Act” and “and 'Corporate and Auditing Accountability and Responsibility Act”. The main objective of the act is to protect investors by improving the accuracy and reliability of corporate disclosures. New aspects are created by SOX act for corporate accountability as well as new penalties for wrong doings. It was basically introduced after major corporate and accounting scandals including the scandals of Enron, WorldCom etc so that the same kind of scandals do not repeat again. There are 11 titles on the act. Each title consists of several sections. The Securities and Exchange Commission needs to implement rulings on the requirements to comply with the law. These major elements are- 1. Public Company Accounting Oversight Board: This title establishes the Public Company Accounting Oversight Board. It provides specific processes and procedures for compliance audits, policies for control purposes. Basically it provides an oversight of public accounting firms that do auditing. 2. Auditor Independence: It provides standards for external auditor independence, so that conflicts of interest can be minimized. It also mentions the requirements for appointing new auditor and auditor reporting requirements. Auditing companies are prohibited from providing non-audit services (consulting) for the clients for...
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...auditors that create and verify the accuracy of the information within these documents hold the trust of those who rely on accurate financial information. Once the trust is broken, it can take time to rebuild. Unfortunately, the publics’ trust in the accounting profession was shaken with several large scandals such as Enron and WorldCom, and they are still working toward repairing the damage. Investors lost faith and hesitated to invest money, which can hurt the economy. In answer to this developing crisis of faith, President Bush signed the Sarbanes-Oxley Act of 2002 (SOX) (U.S. Securities and Exchange Commission, 2010). This act has far reaching effects on every aspect of the accounting and business world. It placed into effect guidelines and repercussions in accounting to help prevent future fraud. Those standards that were already in place, adapted to SOX and changed to meet the more stringent requirements. One such example is Defense Contract Audit Agency (DCAA) standards. Like all agencies, DCAA had to adapt to the new requirements of SOX, but the changes needed to first be defined. Sarbanes-Oxley Act of 2002 Sarbanes-Oxley Act of 2002 (SOX), not only provides guidelines for the accounting industry but also a means of enforcement. These laws and regulations apply to all publicly traded companies. The purpose of SOX is to create a universal standard that can be upheld in order to increase the confidence the public has in financial statements. The act is broken...
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...Introduction Authored in the wake of the Enron and WorldCom scandal, The Sarbanes-Oxley Act was enacted in 2002, to keep public entities from committing fraudulent financial practices. The name Sarbanes-Oxley derives from former Senator Paul Sarbanes and former Representative Michael Oxley. “The Sarbanes-Oxley Act (SOX) was signed into law by President Bush on July 30, 2002, and created a new private sector, nonprofit corporation-the Public Company Accounting Oversight Board (PCAOB)-to oversee the financial reporting of public companies. Among other changes, SOX's sweeping reforms required that a company strengthen auditor independence; have its chief executives sign off on the financial statements; obtain an opinion about its internal control systems; and have an internal audit function that is examined by external auditors” (Grumet, 2007). Part A Audit Committees The Sarbanes-Oxley Act affects audit committees of public company boards of directors. The committee of the board of directors is directly responsible for the public company financial statements, in addition to the appointment, compensation, and oversight of the work of any registered public accounting firm employed by that issuer. In the case of misunderstanding between management team and the auditor’s regarding financial reporting, it is the audit committee’s responsibility to get everyone involved on the same page. In addition, the audit committees need to monitor all financial information communicated...
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...Sarbanes Oxley Companies Abstract Sarbanes oxley act 2002 was passed on July 30, 2002 and only the public companies are now feeling its impact. This act frequently called the “most significant accounting or auditing legislation since the securities exchange Act of 1934”. After the implementation it has established its demands to the companies for proper management and disclosure of risk. Nortel networks is a giant corporate in telecom industry and as it is expected they also have faced the challenges come from the SOX act. Some of them are in favor and some are against the Nortel. ‘SOX’ has manipulated a larger impact on Nortel internal employee and external customers as well as their financial statement. The outcome of the Nortel is clearly different from before implementing the SOX. This paper is to find out the deeper understanding of SOX, how it governs the public corporate, financial disclosure and practice of public accounting in general sense. Besides this it will focus on the outcomes of Nortel network after implementation of SOX and its financial statement. Introduction There have been found a number of corporate financial scandals (e.g. Tyco International) that provides various type of weakness in the governance and auditing practice in the organization. It represents the failures in controlling the reliability and integrity to the stock markets. The scandals cost billions of dollars for the investors when the affected companies were collapsed. As a result, these...
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...Impact of Unethical Behavior Several key concepts of ethics in accounting and financial decision-making are trust, confidentiality, collaboration, and a code of ethics. Trust and confidentiality go hand-in-hand in business accounting because trust is essential if a company wants loyal customers. Confidentiality is also an integral aspect of financial dealings because privacy is often a concern for many companies and customers. Collaboration is another area of financial decision-making that is relevant because ethical practices promote collaboration. A code of ethics is necessary in accounting and financial decision-making because it provides guidelines and standards for employees on all levels. The Sarbanes-Oxley Act of 2002 was passed in response to the financial scandals such as Enron and WorldCom, and it inevitably had a strong impact on accounting and financial decision making. This law required publicly traded companies to be much more accountable for their finances. The Sarbanes-Oxley Act set new regulations and penalties for public companies to provide investors with security. This act also caused the creation of the Public Company Accounting Oversight Board, or PCAOB, which is in charge of overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies. This new law impacted accounting and financial decision making, because it required companies to be responsible for their financial decisions. It also regulated the...
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...Sarbanes-Oxley Act of 2002 - SOX The finance industry was not always regulated. Prior to the great stock market crash in October of 1929, there was no regulation. After this crash, Congress held hearings to determine the problems and suggest solutions. This resulted in the Securities Act of 1933. The Security Exchange Commission (SEC) was created as a result of the Securities Act of 1933 and the Securities Exchange Act of 1934. The intent of this Commission was to restore confidence to investors by requiring honest reporting, and requiring companies and people who work in the industry to put investors’ interests first. After the fall of several publicly traded companies in 2001, it was clear that the SEC alone was not enough. For this reason and through the guidance of U.S. Senator Paul Sarbanes and U.S. Representative Michael Oxley, Congress passed the Sarbanes-Oxley Act in July 2002 (U.S. Securities and Exchange Commission, 2013). The mission of Sarbanes-Oxley Act of 2002 is stated in Public Law 107-204 (2002), “To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes” (p. 1). To determine if the mission of SOX is successful the following will be discussed; the main advantages and disadvantages associated with SOX, the affects SOX has on public company Chief Operating Executive’s (CEO’s) and Chief Financial Executive’s (CFO’s), the impact SOX has on outside independent audit firms...
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...Abstract The Sarbanes Oxley Act (SOX) has become one of the most important legislative passages since 2002 that has affected the accounting industry. The purpose of this paper is to explore the business practices on Native American Indian reservations and incorporating the Sarbanes Oxley Act (SOX) in to their business administrative policies and procedure plans. The results of this report will provide an initial starting point for chief executive officers and business entreputers on reservations to better understand the importance to incorporate this legislative act so ethical practices can begin to have changes in the business environments. It will further explain that due to the high degree of influence, professionals should follow a strict code of ethics, and I will review the code of ethics established by the Institute of Managerial Accounting. I will use observations, articles, and peer reviewed sources. There is a need for fiduciary educational change that is necessary with respect to how individual employees conduct their business practices that operate on the Indian reservations throughout Indian country. Various Indian organizations operating have experienced an increase of unethical business practices. This changes deals with meeting the challenge of addressing current events and new regulations that need to be established on reservations. In 2010, a report by Sue Woodrow entitled, “Ethics as a building block of economic growth: Global insights...
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...Paper GEB2430 Business Ethics & Social Responsibility Dr. Harvey Weiss June 16th, 2012 Abstract The main purpose of this research paper is to show how the Sarbanes-Oxley Act of 2002 may have contributed to holding corporate executives accountable for their actions then and for the future. This research paper will examine and discuss the origin of the Sarbanes-Oxley Act and go into detail regarding the eleven titles, or sections, of the document that it consists of. This research paper will then touch upon the different countries around the world that have been subsequently enacted with the Sarbanes-Oxley Act and conclude with the debates over the perceived benefits and costs from both opponents and proponents. The following research paper will prove to be useful for any executive running a public corporation. After reading this research paper, one will come to discover and understand the new standards implemented for corporate accountability as well as the new penalties for acts of wrongdoing. Body The Sarbanes–Oxley Act of 2002, also known as the “Public Company Accounting Reform and Investor Protection Act” by the Senate and “Corporate and Auditing Accountability and Responsibility Act” by the House of Representatives and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law passed on July 30, 2002, which set new or enhanced standards for all United States public company boards, management and public accounting firms. It received its name...
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...4 Importance of Transparency 7 What Regulation Typically Covers 7 Regulatory Agencies 8 Accounting Reform 10 Conclusion 13 References 15 Abstract Within the accounting profession there are many complex ethical issues that must be dealt with quite often. It is important that the people working within the industry provide high quality financial statements and always pay close attention to ethical concerns that may arise. Since ethics is such a major concern in the accounting industry, a rules based system is in place for enforcing ethical concerns. There are many regulating bodies that exist that enforce many highly detailed regulations that people within the industry must follow at all times. Throughout history there have been several major accounting scandals that have been followed by new regulation to ensure that these problems do not come up again. CLERP 9 and the Sarbanes-Oxley Act are just a couple of acts that have caused significant changes to the accounting world in recent times. This paper will look at some of the different issues that accountants face as well as some of the regulations that seek to end unethical behavior. Ethical Standards in Accounting Introduction The accounting industry is an always changing and constantly growing industry. Accounting plays a vital role in society and business and up until recently accounting was considered to have some of the highest standards for ethical and moral conduct in business...
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...Article Review: Sarbanes-Oxley Act of 2002 It is unfortunate that many increasing standards come after a failure in the system. The Sarbanes-Oxley Act of 2002 is a primary example. The public scandals of Enron, Tyco and WorldCom were quickly followed with this act. It brought great change throughout the world of business. The Act was enacted in July of 2002 and co-authored by U.S. Sen. Paul Sarbanes of Maryland and U.S. Rep. Michael Oxley of Ohio. The Sarbanes-Oxley Act gave more confidence in investors and creditors when it comes to fraud by reforming reporting standards. Although the market took a huge hit after the collapse of several major companies between 200-2004, the Sarbanes-Oxley began to rebuild the market and the ethical standards within it. The Sarbanes-Oxley brought about many other aspects besides the act itself. In turn, the Public Company Accounting Oversight Board was created, assessment of liability with auditors was enacted, new internal control procedures, and more liability for all involved. The oversight Board is responsible for monitoring public accounting companies and performs regular audits. Sarbanes-Oxley intended for two main things with the market; to boost the confidence of investors in a previously broken market, and to decrease fraud. Along with positives, the Sarbanes-Oxley Act brought on some negative aspects as well. Some public companies required to comply with Sarbanes-Oxley are subject to additional costs directly assigned...
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