Sarbanes Oxley Act Of 2002 Essay

The Sarbanes-Oxley Act of 2002 (SOX), also known as the Public Company Accounting Reform and Investor Protection Act and the Auditing Accountability and Responsibility Act, was signed into law on July 30, 2002, by President George W. Bush as a direct response to the corporate financial scandals of Enron, WorldCom, and Tyco International (Arens & Elders, 2006; King & Case, 2014;Rezaee & Crumbley, 2007). Fraudulent financial activities and substantial audit failures like those of Arthur Andersen and Ernst and Young had destroyed public trust and investor confidence in the accounting profession. The debilitating consequences of these perpetrators and their crimes summoned a massive effort by the government and the accounting profession to fight all forms of corruption through regulatory, legal, auditing, and accounting changes.

Prior to the creation of the Sarbanes-Oxley Act in 2002, “a number of high profile accounting frauds and misstatements, some of unprecedented scope and scale, dominated the headlines” (Kulzick, 2008). According to Kulzick, one out of every ten public companies had restated earnings during the last five years and companies such as Enron, WorldCom, Adelphia, Tyco, Global Crossing, and Arthur Anderson were dominating the headlines with financial discrepancies resulting from poor oversight that were contributing to massive losses in the stock market. In my opinion, all fiscally responsible organizations should want to pull best practices from Sarbanes-Oxley to ensure their reporting is accurate, consistent, appropriate, complete, and understandable regardless of if they are requirements or not. This can be accomplished by ensuring the CEO and CFO are certifying the accuracy of all financial information and internal controls before it’s published for public

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

Early on, in the twenty-first century, several corporate accounting scandals led to the loss of billions of dollars worth for investors. Which also caused several bankruptcies for several corporations such as Enron, WorldCom, and Adelphia (Auerbach, 2010, pp. 1). Therefore, the United States Congress reformed corporation’s accounting practices that would hold executives accountable for accuracy of their company’s financial statements. This is the Sarbanes-Oxley Act of 2002, also known as the SOX Act or SarbOX Act.

In addition, associated with the misapplication of accounting methods, the financial industry has been plagued with one disaster after another involving numerous scandals from top leading American companies. Consequently, the Sarbanes-Oxley Act was passed in 2002 compromising eleven sections that are generated to insure the responsibilities of the company’s managers and executives. This act identifies criminal penalties for particular unethical practices and currently has new policies that a corporation must follow in their financial reporting. The following examples describe some of biggest accounting methods as a result of the greed and the outrage of the ethical and financial misconduct by the senior management of public corporations.

Sarbanes-Oxley Act was a game changer for corporations all across the United States. Prior to Sarbanes-Oxley Act, big name companies such as Enron, Kmart and Tyco were more inclined to have fraudulent activities happen internally. Having all these issues arise during the last decades, Congress was anxious to act and create Sarbanes-Oxley Act with the intentions to protect investors and have strict reforms to deter internal financial frauds from occurring again. Although, this reform has had a great amount of success in achieving its goals, it also has some holes that were not well though out, when it comes to the entirety of it. The main problem with Sarbanes-Oxley is the cost it has on smaller companies, which shifted the power from the investors and into the auditors. (Prince, 2005)

Most word references characterize fraud as a bogus representation of true data. Whether that false data is given by expressing false words, deluding claims, or by concealing or disguising uncovered data, it is viewed as fraudulent because of the beguiling nature. In spite of the fact that it is deceptive to give false data, people even in real companies will attempt to cover their misfortunes by reporting false data. Taking after many years of monetary frauds and outrages including executives and officers at a portion of the biggest organizations in the United States, Congress established the Sarbanes-Oxley Act of 2002 (Cheeseman, 2013). Congress ordered the Sarbanes-Oxley Act of 2002 (SOX Act) to shield customers from the fraudulent exercises of significant partnerships. This paper will give a brief history of the SOX Act, portray how it will shield general society from fraud inside of partnerships, and give a presumption to the viability of the capacity of the demonstration to shield purchasers from future frauds.

Unfortunately, all those efforts have not been vindicated because of the following reasons: Accounting did not cause the recent corporate scandals such as Enron and WorldCom. Unreliable financial statements were the results of management decisions, fraudulent or otherwise. To blame management’s misdeeds on fraudulent financial statements casts accountants as the scapegoats and misses the real issue. Reliable financial reports rely to a certain extent on effective internal controls, but effective internal controls rely to a large extent on a reliable management system coupled with strong corporate governance. when management deliberately or even unlawfully manipulates business processes in order to achieve desirable financial goals and present untruthful financial reports to the public, accounting systems are abused and victims rather than perpetrators.

The Sarbanes-Oxley Act of 2002 (often shortened to SOX) is legislation passed by the U.S. Congress to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise, as well as improve the accuracy of corporate disclosures. The U.S. Securities and Exchange Commission (SEC) administers the act, which sets deadlines for compliance and publishes rules on requirements.

The Sarbanes-Oxley Act of 2002 (SOX) was passed by U.S congress in 2002 to protect investors from fraudulent accounting activities by corporations. Whether the organization is big or small, the act mandates strict reforms to improve financial disclosures from corporations, helping to prevent accounting fraud. It is a federal law that established new and expanded requirements for all U.S. public company boards, management, public accounting firm's, as well as privately held companies. SOX requires top management individually certify the accuracy of financial information, and includes penalties for fraudulent financial activity. The bill was enacted in response to a large number of major corporate and accounting scandals the cost of investors

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, or SOX Act, was enacted on July 30, 2002. Since it was enacted that summer it has changed how the public business handle their accounting and auditing. The federal law was made coming off of a number of large corporations involved in scandals. For example a company like Enron was caught in accounting fraud in late 2001 when the company was using false financial statements. Once Enron was caught that had many lawsuits filed against them and had to file for bankruptcy. It was this scandal that played a big part in producing the Sarbanes-Oxley act in 2002.

After major corporate and accounting scandals like those that affected Tyco, Worldcom and Enron the Federal government passed a law known as the Sarbanes-Oxley Act of 2002 also known as the Public Company Accounting Reform and Investor Protection Act. This law was passed in hopes of thwarting illegal and misleading acts by financial reporters and putting a stop to the decline of public trust in accounting and reporting practices. Two important topics covered in Sarbanes-Oxley are auditor independence and the reporting and assessment of internal controls under section 404.

The Sarbanes Oxley Act came to existence after numerous scandals on financial misappropriation and inaccurate accounting records. The nature of scandals made it clear there are possible measure that could be used to prevent future occurrence of financial scandals. And the existence and effectiveness of Sarbanes Oxley has caused

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