Essay about Ligand Case

Congress enacted the Sarbanes-Oxley (SOX) Act of 2002 to restore investor confidence by requiring public companies to strengthen corporate governance through several mechanisms, including enhanced disclosure on Internal Control Over Financial Reporting (ICFR). As claimed by regulators, the disclosures on the effectiveness of ICFR are aimed at improving the quality of financial reporting, which would, in turn, reduce the information asymmetry for investors in U.S. capital markets” (Donaldson). Sarbanes- Oxley named after its creators, Senator Paul Sarbanes, D-Md and Congressman Michael Oxley, R-Ohio. Enacted in 2002 with the purpose to crack down on corporate fraud. The implementation of Sarbanes-Oxley led to the creation of the Public Company Accounting Oversight Board (PCAOB) to oversee the accounting industry. It was created to eliminate corporate fraud, and it put in place a ban on company loans to executives while also giving job protection to whistleblowers. Before SOX was put into place the accounts were a self-regulated profession, such as medical professionals and lawyers. This is what led to the fraudulent actions of major institutions, people can be greedy, and they need checks and balances to ensure the fidelity of the firm. There are criminal enhanced penalties for corporate fraud and related misdeeds, this brings justice to the sector as well as working as a deterrent for additional immoral

On July 30, 2002, The Sarbanes-Oxley Act of 2002 (SOX) was signed into law by President Bush. "The Act mandated some reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud" (SEC.Gov. 2013 P. 1). The SOX Act also created the Public Company Accounting Oversight Board (PCAOB) in response to numerous failures of the profession to fulfill its trusted role; to oversee the activities of the auditing profession (SEC.Gov, 2013. The auditing of financial statements is required for the protection of public investors; however the question that arises is whether or not all PCAOB members should be taken from the investments communities that use audited financial statements. The remaining of this

Prior to 2002, there was very little oversight of accounting procedures. Auditors were not always independent and corporate government procedures and disclosure provisions were inadequate. Sometimes, executive compensation was tied to the stock of the company which created an incentive to manipulate the stock price by using fraudulent accounting practices to make it look like companies were making more money than they actually were. The Sarbanes-Oxley Act of 2002 was introduced because of the collapse of several major corporations due to these practices. This paper will

The Sarbanes-Oxley Act of 2002, also known as the SOX Act, is enacted on July 30, 2002 by Congress as a result of some major accounting frauds such as Enron and WorldCom. The main objective of this act is to recover the investors’ trust in the stock market, and to prevent and detect corporate accounting fraud. I will discuss the background of Sarbanes-Oxley Act, and why it became necessary in the first section of this paper. The second section will be the act’s regulations for the management, external auditors, and companies, mainly publicly-traded companies, and the cost and benefits of the act. The last section will be the discussion of the quality of financial reporting since SOX and the effectiveness of SOX provisions to prevent

“Sarbanes-Oxley Act of 2002” mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud, and created the "Public Company Accounting Oversight Board," also known as the PCAOB, to oversee the activities of the auditing profession” (U.S. Securities and Exchange Comissions).

“Outside auditors play a crucial role in our nation’s financial system. As the watchdogs of corporate accounting, they are supposed to protect investors” (Hilzenrath, 2010). The question is how effective are these outside auditors in protecting investors? When you think about the failures that have occurred: Enron, WorldCom, Adelphia, Tyco, and Global crossing to name a few, one would really question the effectiveness of these outside auditors. As a result of these failures, Congress pass the Sarbanes Oxley Act of 2002. This act in turn created the Public Company Accounting Oversight Board (PCAOB) to police the outside auditors and ensures they are protecting the investors.

To start, the agency assigned to oversee the implementation of the Sarbanes-Oxley Act is the Securities and Exchanged Commission (SEC). It created the Public Company Accounting Oversight Board (PCAOB) to monitor and evaluate auditing reports from accounting firms to ensure the quality of financial statements and that full corporate governance is being carried out. It sets a standard that all firms must follow closely. PCAOB is an independent organization whose primary role is to catch and recognize any suspicious and unethical activities in accounting firms and oversee that firms are following the compliances rules of SOX. A typical auditing report created by PCAOB is divided into two parts. According the Nagy (2014), the first part consists of a list of any flaws in compliance and auditing errors and the second part is quality control. The purpose of creating PCAOB is to promise investors and the general public that firms are following the strict compliance policy of SOX and that the SEC is aware of the financial situation of companies because it is keeping a close eye on monitoring business

After a prolonged length of corporate scandals involving big public businesses from 2000 to 2002, the Sarbanes-Oxley Act changed into enacted in July 2002 to restore buyers' self-belief in markets and near loopholes for public groups to defraud traders. The act had a profound effect on company governance within the country. The Sarbanes-Oxley Act requires public groups to bolster audit committees, carry out inner controls assessments, set personal liability of directors and officers for accuracy of financial statements, and enhance disclosure. The Sarbanes-Oxley Act also establishes stricter crook consequences for securities fraud and changes how public accounting companies operate their corporations.

The Sarbanes-Oxley Act was signed into law in 2002 and it was ment to ensure that publicly traded companies complied with policies that made their financial records honest and not distorted to make them look better or to make them look worse. This was supposed to cut down on the corporate fraud with accounting. This all started because some companies such as, Enron and WorldCom. Enron was reporting inaccurate trading revenues by acting as a middle man in partnerships and selling back and forth these partnerships and crediting Enron for the profits (Britannica). The government stepped in and investigated their accounting practices and while the investigation was occurring, their accountants started destroying evidence (Britannica). WorldCom, through their accounting records improperly stated $3.8 billion in five quarters (cbsnews). WorldCom should have showed a net loss but WorldCom’s records showed otherwise. WorldCom’s accountant company was the same as the Enron scandal and they claimed that they “complied with professional and Securities and Exchange Commission standards” with WorldCom. In both companies, the result of their wrongdoing made their stocks completely crash and their top executives in trouble with the law. The Sarbanes-Oxley Act makes companies create an oversight board or in case of the company not making one, by law, the board of directors is the board. The board is responsible to oversee that the financial records of the company is incompliance with the

After the demise of Enron due to accounting fraud, the Sarbanes-Oxley (SOX) Act was created by the government to establish penalties for corporate fraud and require companies to have a code of ethics along with transparency accounting for shareholders (Ferrell, Fraedrich, & Ferrell, 2013). In other words, the Sarbanes-Oxley Act provides a set of checks and balances making it more difficult for a corporation to defraud shareholders. The Sarbanes-Oxley Act created the Public Company Oversight Board, which is responsible for monitoring accounting firms and establishing the rules that must be followed (Ferrell, et al, 2013).

The Sarbanes-Oxley Act of 2002 significantly increased the authority of audit committees in overseeing their companies’ financial reporting processes. One of the audit committee’s responsibilities is that they oversee the financial reporting process. Audit committees are required to review and discuss the annual audited financial statements with management and the external auditors. They also monitor control processes. Monitoring internal controls directly affects the reliability of financial statements is generally understood to be a function of audit committees. SOX section 301 directed the SEC to require audit committees to establish procedures to handle complaints on accounting, internal accounting controls, or auditing matters and to provide confidentiality to employees who submit complaints. Section 301 also states that audit committees are solely responsible for all the aspects relating to selecting, hiring, and replacing external auditors, whom report to the audit committee. An audit committee approves the compensation to external auditors. It also states that audit committees must discuss and resolve disagreements between management and external auditors.

Sarbanes- Oxley is a law that protects shareholders and the ordinary people from accounting errors and malpractices. The objective of this law is to improve company’s control not only the financial section but also how the company is responsible for storing electronic records.

The Sarbanes-Oxley Act has made a great impact on the accounting industry. Public companies must now include an internal report with their annual audits and Company officers also must now sign financial statements ensuring their accuracy. There are also increased penalties for individuals who try to misrepresent actual figures. The Sarbanes –Oxley Act has

Since the enactment of the Sarbanes-Oxley Act and the economic downfall following the financial scandals of Enron, Tyco and WorldCom, there has been a heightened expectation fallen upon auditors. The public relies on the auditing profession to detect fraud and material misstatement and potentially prevent economic disasters, similar to what occurred in the early 2000’s. As auditors are required to provide due diligent care to the users/shareholders it is now being suggested by multiple publications that identifying fraud risks during an audit engagement could increase auditors’ liability. Scholars and practitioners have expressed concerns suggesting that the United States legal system in cases of undetected fraud, penalize auditors for investigating fraud risks. And if this to be true, why are auditors’ being scrutinized for simply following auditing standards? SAS no.99 (Statements on Auditing Standards) provides standards and guidance auditors’ are required to follow while considering fraud during a financial statement audit. This includes identifying fraud risks, assessing, evaluating and responding to the identified risks and lastly documenting the considerations of fraud. The article written by Andrew B. Reffett, “Can Identifying and Investigating Fraud Risks Increase Auditor Liability?” examines these liability issues by conducting an experiment that tests whether or not an auditor is liable after

The Sarbanes Oxley act has had many affects on audits of publicly traded companies. The Sarbanes Oxley act is designed to protect investors of publicly traded companies because they are presumed to be at a further distance from the management of the company and are therefore more vulnerable to inaccurate reporting. Title I of the Sarbanes Oxley act creates an independent Public Company Accounting Oversight Board, which is under the Securities and Exchange Commission. The PCAOB regulates, registers, inspects and oversees companies that audit publicly traded companies.