SOX Financial Reporting Paper

The Sarbanes-Oxley Act (SOX) of 2002 was implemented to deter fraudulent activities amongst companies by monitoring and auditing financial activities as well as set up internal controls to aid in the safeguard of company funds and investor’s interest. SOX also regulates the non-audit tax services (NATS) that can be performed by an auditing firm. SOX was passed by Congress in 2002 in an attempt to address the unethical behaviors of corporate firms such as Enron, WorldCom, Sunbeam, and others (Raabe, Whittenburg, Sanders, & Sawyers, 2015). Raabe et al. (2015) continues explaining that SOX was created in response to the inadequacies

The Sarbanes-Oxley Act of 2002 was implemented and designed to “protect the interests of the investing public” and the “mission is to set and enforce practice standards for a new class of firms registered to audit publicly held companies” (Verschoor, 2012). During the early 2000 's, the world saw an alarming number of accounting scandals take place resulting in many corporations going bankrupt. Some of the major companies involved in these scandals were from Enron, WorldCom, and one of the top five accounting and auditing firms, Arthur Andersen. These companies were dishonest with their financial statements, assuring the public the company was very successful, when in reality they were not. This became a problem because if the public believes a company is doing well, they are more likely to invest in it. That is to say, once these companies were exposed, it caused a number of companies going bankrupt and a major mistrust between the public and the capital market. Consequently, the federal government quickly took action and enacted the Sarbanes-Oxley act of 2002, also known as SOX, which was created by the Public Company Accounting Oversight Board (PCAOB), and the Securities and Exchange Commission (SEC). Many have questioned what Norman Bowie (2004) had questioned,

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.

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. Also, SOX increased the oversight role of boards of directors and the independence of the outside auditors who review the accuracy of corporate financial statements.[1]

In the article “SOX- Context and Theory: Market Failure, Information Asymmetry & The case for regulation …volume 9(3), Professor Jasso argued that Sarbanes Oxley Act is a principle that be used only for the “ethical and moral boardroom in the public corporation”, however, it is intensely more than that (Jasso, 1). In other words, Professor Jasso had many reasons to proof that the act itself had made a positive impact to the financial and managerial accounting since the ‘July 30, 2002’ (Jasso, 1). He described how SOX had made

In 2002 the U.S. Congress passed the Sarbanes-Oxley Act of 2002 (SOX), a legislation put in place not only to improve the accuracy of corporate disclosures, but also to protect shareholders and the general public from accounting errors and fraudulent practices in all organizations. Although these organizations include corporations, small businesses, non-profit institutions, government bodies and any other entity where business is conducted,

The Sarbanes-Oxley (SOX) act was passed into law in 2002. It was created in response to major financial scandals that largely shook the public's confidence in corporate accounting practices. It was a significant response to improper record handling techniques. Under the law, corporate managers must assess whether they have sufficient safeguards to catch fraud and bookkeeping errors. There are consequences for not complying with the provisions of the act and there are certainly advocates and opponents of it. Price Waterhouse Coopers says "Without a doubt, the Sarbanes-Oxley Act is the single most important piece of legislation affecting corporate governance, financial disclosure and the practice of public

“… The era of low standards and false profits is over; no boardroom in America is above or beyond the law." (Bumiller) By way of landslide votes in both the U.S. House of Representatives and the U.S. Senate, in July of 2002, the Sarbanes-Oxley (SOX) act was approved. To understand the cause and effect of this landmark legislation, the SOX act warrants exploration of the events leading to its creation, the details of the act itself, and the impacts on responsibilities to both firms’ management teams and their auditors. While the implementation of Sarbanes–Oxley has been positive for investors, company managers and auditors, specifically, are bearing the burden of complying with SOX through significantly greater responsibilities.

The Sarbanes-Oxley Act of 2002, also known as the SOX Act, was created in response to the series of misleading and outright fraudulent activity of big business in 1990s (Lasher, 2008, p. 187). Multiple publicly-traded businesses raised up their stock prices by “publishing false or deceptive financial statements” (Lasher, 2008, p. 187). The most notable company to crash were Enron, WorldCom and Tyco. Eventually almost one thousand publicly traded companies restated their financial statements which resulted in almost $6 trillion of stock market value disappearing (Lasher, 2008, p. 187). In response to these events, Congress drafted and passed the Sarbanes-Oxley Act (SOX) of 2002.

The following was an Act passed by U.S. Congress in 2002 in response to a loss of confidence among American investors suggestive of the Great Depression; President George W. Bush signed the Sarbanes-Oxley Act into law on July 30, 2002. SOX as the law was quickly entitled, was planned to guarantee the reliability of publicly reported financial information and reinforce confidence in U.S. capital markets. SOX contains expansive duties and penalties for corporate boards, executives, directors, auditors, attorneys, and securities analysts. SOX works to protect investors from the possibility of fraudulent accounting activities by corporations. The Act mandated a number of reforms to improve corporate responsibility, improve financial disclosures

The objective of the act is to protect the general public and shareholders from fraudulent activities and accounting errors and to improve the veracity of corporate disclosure. All public companies must now comply with the Sarbanes-Oxley Act. This act not only affects a company financially but it also affects the IT department as they will be managing the data and how long it is to be stored for. The SOX act has stated that all records within the business should not be stored for more than five years. If this is not complied with then there is a chance that they may be faced with fines, imprisonment or even both. The benefactors of the SOX act believed that it was fundamental to “restore public faith in published financial statements by assuring that accounting records were accurate and could be relied upon” (Jahman & Dowling, The Impact of Sarbanes-Oxley Act, 2008). There has been a growing impression that these previous scandals could have been prevented if an agency was formed by the government to help monitor and prevent these inconsistencies in accounting. The debate still continues on whether the Act is efficient.

Sarbanes Oxley mandates requires all public companies to establish internal controls and procedures for financial reporting. In addition they must document, test and maintain those controls and procedures to ensure their effectiveness. The purposes of SOX are to emphasis on corporate governance and to reduce the possibilities of corporate fraud by increasing the stringency of procedures and requirements for financial reporting.

The Sarbanes-Oxley Act (SOX) was enacted in July 30, 2002, by Congress to protect shareholders and the general public from fraudulent corporate practices and accounting errors and to maintain auditor independence.   In protecting the shareholders and the general public the SOX Act is intended to improve the transparency of the financial reporting.   Financial reports are to be certified by the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) creating increased responsibility and independence with auditing by independent audit firms. In discussing the SOX Act, we will focus on how this act affects the CEOs; CFOs; outside independent audit firms; the advantages and a

Sarbanes Oxley (also known as SOX) is legislation passed by the United States Congress in 2002, in the wake of a number of major corporate accounting scandals. Enron, WorldCom, Tyco, and others cost investors billions when their stock prices collapsed. As a result of SOX, top management must separately certify the accuracy of financial Furthermore, consequences for fraudulent financial activity are much more severe. Also, SOX intensified the management role of boards of directors and the independence of the external auditors who review the accuracy of corporate financial statements. The primary changes caused the formation of the Public Company Accounting Oversight Board, the assessment of personal liability to auditors, executives and board members and creation of the Section 404, which recognized internal control events that had not existed before the legislation.

The Sarbanes-Oxley Act of 2002 (SOX) was enacted into law in 2002 in the wake of corporation financial reporting scandals involving large publicly held companies. SOX instituted new strict financial regulations with the intent of improving accounting practices and protecting investors from corporate misconduct. SOX requires corporate executives to vouch for the accuracy of financial statements, and to institute and monitor effective internal controls over financial reporting. The cost of implementing an effective internal control structure are onerous, and SOX inflicts opportunity costs upon an enterprise as executives have