By Reviewing Sox’S Sections It Was Noted There Are Four
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By reviewing SOX’s sections it was noted there are four sections that could address the aspects of the fraudulent activities at Phar-Mor. It’s very complicated to precise the fraud would be successfully prevented in this case since it was perpetuated at a very high level thereby there is a great chance the executives would have found a way to hide it. In this case as the fraud was perpetrated at the top executive’s level, SOX probably would prevent the involvement of some other employees in the scheme, however the fraud activities would have occurred whether or not SOX was in place at the time. Nevertheless, it is indisputable that SOX could have prevented the scandal.
The first section found is Title II, Section 203, in this section is…show more content… Cherelstein has joined the Phar-Mor in 1990, therefore, Phar-Mor could not have been able to hire him directly from Coopers if SOX were already implemented at that time, because this would violate the one-year rule.
The section 302 in Title III - “Corporate Responsibility for Financial Reports”, would have made the CEO and CFO, which are Monus and Finn, respectively, state their understanding on how fair the financial statements presents the condition and result of operations in all material aspects. In part 5, this section also requires disclosure of significant deficiencies identified in internal control to the auditors and audit committee, among other disclosures related to fraud.
The section 404 in Title IV - “Management Assessment of Internal Control” states on subsection “a” the establishment, assessment and assortment of an adequate internal control structure is management responsibility, as management has perpetuate the fraud, this subsection alone will not be sufficient to uncover the fraud. However, subsection “b” request that the auditors also assess and report on management’s assessment, regarding this point I was able to found a passage on Finn testify stating the fraudulent entries would have been given to the auditors if they made this assessment.
The Waste Management Inc. scandal was an enormous financial fraud