Enron And The Creation Of The Sarbanes-Oxley Act

In this paper, we will be discussing how Sarbanes Oxley has affected the American business and if it has accomplished its goals. The goal of the Sarbanes-Oxley Act (SOX) is to convey confidence in the stock exchange, but it does not defer all immoral activities that take place on the stock exchange. People no matter the law, are responsible for the quality of their work and are accountable for the integrity of themselves and their company. Their own ethical values can take precedence over those set by Sarbanes-Oxley. Not all values are equal in quality, and a person may go above the rules delegated by Sarbanes-Oxley, however, there is another side. Sarbanes-Oxley has created a fear among business practitioners that this new set of standards

The audit profession is a relative new comer to the accounting world. The Industrial Revolution, with the growing business sector, was the spark that resulted in auditing techniques being sought out and utilized. Initially, audit techniques and methods were adopted by companies to control costs and detect fraud, which is more closely aligned with internal auditing. However, the need for mandatory oversight of public companies was recognized after the great stock market crash of 1929 (Byrnes, et al., 2012). This brought about the Securities and Exchange Act of 1934 creating the Securities and Exchange Commission (SEC). At that point, the SEC was tasked with

Greg Whalley, (former Enron President and Chief Operation Officer) had six to eight conversations last fall with the Treasury’s Department Peter Fisher, including one in which he asked Fisher to call Enron’s lenders as they decided whether to extend credit to the company.

Throughout history and in our own time, legitimate accounting methods have been utilized to fraudulently engage in manipulating activities that results in illicit gains to the perpetrators and losses to individuals and financial institutions.

SOX enactment is an act that was formulated as a result of corporate scandals from Enron, WorldCom, Adelphia, and Tyco. However, Congress succumbed to pressure from the public for the government to take action about the unethical behavior of company executives of publicly –traded companies. Thus, the Sarbanes-Oxley (SOX) was to restore the integrity and public confidence in financial markets. During these scandals, there were flagrant disregard to Generally Accepted Accounting Practices (GAAP). For example, according to Washington Post (2005), WorldCom

The Sarbanes-Oxley Act, also known as SOX Act, is a federal law that was passed on July 30, 2002, by Congress. This law was established to help set new or enhance laws for all United States accounting firms, management, and public company. The SOX Act would now make corporate executives accountable for their unethical behavior. This bill was passed due to the action of the Enron and Worldcom scandal, which cost their investors billions of dollars, caused their company to fold, and questioned the nations' securities markets.

The Sarbanes-Oxley Act of 2002 (SOX) was passed by Congress and signed into law by President Bush to “mandate a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud” and applies to all public companies in the U.S., large and small (The Laws That Govern the Securities Industry, 2015). The main purpose of Sarbanes-Oxley is to “eliminate false disclosures” and “prevent undisclosed conflicts of interest between corporations and their analysts, auditors, and attorneys and between corporate directors, officers, and shareholders” (Neghina & Riger, 2009). As a whole, the Sarbanes-Oxley Act is very complex and affected organizations must do their due diligence to ensure they

Prior to the 2002 scandal of Enron, the standards for financial reporting were much more relax than the regulations that businesses encounter today. The Sarbanes Oxley Act of 2002(SOX) came into play as a response to the unruly financial reporting to the public from companies such as Enron, Arthur Andersen, Tyco and WorldCom. The public scandals created insecurities for any American to invest in big companies, due to fear of additional fraud encounters. The Sarbanes Oxley Act was enacted to try create some trust between these big companies and the hardworking individuals who were investing in them. The fraud scandals were front page news stories and the government hoped that passing this legislation

Prior to the advent of the Sarbanes-Oxley Act of 2002, referred to herein as “SOX,” the board of directors’ pivotal role was to advise senior leaders on the organization’s strategy, business model, and succession planning (Larcker, 2011, p. 3). Additionally, the board had the responsibility for risk management identification and risk mitigation oversight, determining executive benefits, and approval of significant acquisitions (Larcker, 2011, p. 3). Furthermore, for many public organizations, audit committees existed before SOX and provided oversight of internal processes and controls. Melissa Maleske (2012) advised that the roles and responsibilities of the board were viewed “…from a perspective that the board serves management” (p. 2). In contrast, Maleske (2012) noted that SOX regulations altered the landscape “…to a perspective that management is working for the board” (p. 2). SOX expanded not only the duties of the board and the audit committee, but also the authority of these bodies (Maleske, 2012, p. 2).

White collar crime has been around for ages. Today more and more news stories can be found where the elite, the top executives of fortune 500 companies, are being prosecuted for participating in illegal activities. It was hoped that the passing of the Sarbanes Oxley Act of 2001 after the Enron debacle would reduce the amount of illegal acts being committed in corporate America. The Sarbanes Oxley act makes executives personally responsible for their activities requiring top management to sign off on financial statements stating they are true and accurate and these executives can face jail time for committing fraudulent acts. Unfortunately, immorality in business is still running rampant. One illegal practice we see happening in

The time frame is early 2002, and the news breaks worldwide. The collapse of corporate giants in America amidst fraud and stock manipulations surfaces. Enron, WorldCom, HealthSouth and later Adelphia are all suspected of the highest level of fraud, accounting manipulation, and unethical behavior. This is a dark time in history of Corporate America. The FBI and the CIA are doing investigations on all of these companies as it relates to unethical account practices, and fraud emerges. Investigations found that Enron, arguably the most well-known, had long shredding sessions of important documents and gross manipulation of stocks and bonds. This company alone caused one of the biggest economic

Surbanes Oxley Act 2002 Historical forces have a way of acting in concert, even when propelled by markedly different factors. In the United States, a spate of astonishing high-profile corporate failures have shaken investor confidence and placed corporate fraud and accounting abuses center stage before the public and its governmental representatives. The legislative response to these events was the rapid passage of the Sarbanes- Oxley Act (the Act) of 2002, which virtually overnight transformed the landscape of financial reporting and corporate responsibility. Within the same relative time frame, the European Union (EU) has been pushing to eliminate barriers to cross-border trading in an effort to support the creation of a

In light of the recent scandals that rose around big multinationals such as Enron and WorldCom, it has become evident that reform in the traditional corporate operations and objectives was to be encompassed in the organisations corporate strategies. Indeed throughout the years, companies main objectives were defined primarily as being economic objectives, Multinationals developed with sight of profit maximisations regardless to the other incentives, Friedman considered that to be the foundation for a well-managed company, it was further considered that the financing of any other sort of social corporate activities rather unnecessary. The expenses were regarded as expenditures for the owners and investors; this was a time where shareholders rights were regarded as conflicting with other constituents namely the employees, creditors, customers or the community in general. However this interpretation is seen as rather inadequate due to the nature of the amalgamated relation between both constituents. Stakeholders in modern corporate doctrine are considered as a core apparatus for the well functioning of a business. It is however often argued that the only way for a corporation to achieve better results and maximise its profits is to include other people in the process, individuals or organisations with direct or indirect interest in the well performance of the company, that is the reason why modern regulations and codes include a number of stakeholders other than the

Ethics in the business world can often times become a second priority behind the gaining of profits and success as a company. This is the controversial issue that led to the Enron scandal and ultimately the fall of this company. Enron Corporation was an energy company, and in the peaks of their success, they were the top supplier of natural gas and electricity throughout America. Enron Corporation came about from a merger between Houston Natural Gas and InterNorth. Houston Natural Gas was a gas providing company formed in Houston during the 1920’s. InterNorth was a company formed in Nebraska during the 1930’s and owned one of America’s largest pipeline networks. In 1985, Sam Segnar, the CEO of InterNorth bought out Houston Natural Gas for $2.4 billion. A year later in 1986, Segnar retired and was replaced by Kenneth Lay, who renamed the company and created Enron. Enron was the owner of the second largest pipeline in America that measured over 36,000 miles. The company was also the creator of the “Gas Bank”, which was a new way to trade and market natural gas and served as an intermediary between buyers and sellers. As the company continued to develop, it became more of a trader rather than a producer of gas. This trading extended into coal, steel, water and many other areas. One of Enron’s largest successes was their creation of a website called, “Enron Online” in 1999, which quickly became one of the top trading cites in the world. By the year 2000 Enron as a company was

Most of the world has heard of Enron, the American, mega-energy company that “cooked their books” ( ) and cost their investors billions of dollars in lost earnings and retirement funds. While much of the controversy surrounding the Enron scandal focused on the losses of investors, unethical practices of executives and questionable accounting tactics, there were many others within close proximity to the turmoil. It begs the question- who was really at fault and what has been done to prevent it from happening again?