Sarbanes-Oxley Act Of 2002 Pros And Cons

History of SOX - the Sarbanes-Oxley Act of 2002 is legislation in response to the high profile financial scandals, such as seen with Enron and WorldCom. The purpose of this act is to protect shareholders and the general

The purpose of this memo is to provide you with information on the Sarbanes-Oxley Act of 2002 (SOX Act) and to describe the importance of its implementation, per your request. The SOX Act was first introduced in the house as the “Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002” by Michael Oxley on February 14, 2002. Paul Sarbanes, a Democrat U.S. Senator, collaborated with Mr. Oxley, a Republican US Senator, creating significant bipartisan support. The SOX Act was enacted by the end of July 2002 in response to recent corporate accounting scandals. The twin scandals that were impetus for the legislation involved the corporations of Enron and WorldCom.

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.

The Sarbanes-Oxley Act (SOX) is a legislation enacted in 2002 under the sponsorship of U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH). The law introduced increased government oversight for publicly held companies. It also imposes additional management responsibilities and corporate operating costs on companies trading under SEC regulations. Sarbanes-Oxley was enacted in direct response to a number of corporate accounting scandals, including those of Enron, Tyco International, and WorldCom.

Since the act was established, Congress was placed under heavy fire. In the eyes of its opposers, SOX will do more to hurt than it helps. Critics state that the law puts too much power into the hands of the PCAOB. They are given almost unlimited power without any checks or balances. “Sarbanes-Oxley empowers the Board with the most authoritarian powers imaginable.

The main objective of the Sarbanes-Oxley act was to reduce fraud. So far that objective seem to have been obtain. Since SOX was enacted, there has not been a major domestic corporate financial scandal uncovered other than the options back-dating scandal that occurred before July 2002 (Jahmani & Dowling, 2008). It is a tax advantage because companies and investors are not losing money.

The Sarbanes-Oxley is a U.S. federal law that has generated much controversy, and involved the response to the financial scandals of some large corporations such as Enron, Tyco International, WorldCom and Peregrine Systems. These scandals brought down the public confidence in auditing and accounting firms. The law is named after Senator Paul Sarbanes Democratic Party and GOP Congressman Michael G. Oxley. It was passed by large majorities in both Congress and the Senate and covers and sets new performance standards for boards of directors and managers of companies and accounting mechanisms of all publicly traded companies in America. It also introduces criminal liability for the board of directors and a requirement by

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,

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 of 2002 was passed by congress in 2002 and has been instrumental in protecting investor from fraud. The Act was passed to respond to the accounting malpractices of many corporations such as ENRON, who conducted many deceiving practices. It Is also known as the SOX Act and it required strict reform to improve financial disclosures from corporation to prevent fraud. This has been instrumental and has brought a higher level of accountability to companies.

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.

Sarbanes-Oxley (SOX) was created to address the reoccurrence the likes of the several major scandals of the past. The nature of those past years scandals made it clear that preventative measures was a possible way to prevent any future scandals. And the efficacy of Sarbanes Oxley Act, many people as well as companies believed that fraud is easy to prevent.

The development of the Sarbanes-Oxley Act (SOX) was a result of public company scandals. The Enron and Worldcom scandals, for example, helped investor confidence in entities traded on the public markets weaken during 2001 and 2002. Congress was quick to respond to the political crisis and "enacted the Sarbanes-Oxley Act of 2002, which was signed into law by President Bush on July 30" (Edward Jones, 1), to restore investor confidence. In reference to SOX, penalties would be issued to non-ethical or non-law-abiding public companies and their executives, directors, auditors, attorneys, and securities analysts (1). SOX significantly transformed the procedures in which public companies handle internal

The Sarbanes-Oxley Act was passes in 2002 in response to a handful of large corporate scandals that occurred between the years 2000 to 2002, resulting in the losses of billions of dollars by investors. Enron, Worldcom and Tyco are probably the most well known companies that were involved in these scandals, but there were a number of other companies guilty of such things as well. The Sarbanes-Oxley Act was passed as a way to crackdown on corporations by setting new and improved standards that all United States’ public companies and accounting firms were and are required to abide by. It also works to hold top level executives accountable for the company, and if fraudulent behaviors are discovered then the executives could find themselves in hot water. The punishments for such fraudulence could be as serious as 20 years jail time. (Sarbanes-Oxley Act, 2014). The primary motivation for the act was to prevent future scandals from happening, or at least, make it much more difficult for them to happen. The act was also passed largely to protect the people—the shareholders—from corporations, their executives, and their boards of directors. Critics tend to argue that the act is to complicated, and costs to much to abide by, leading to the United States losing its “competitive edge” in the global marketplace (Sarbanes-Oxley Act, 2014). The Sarbanes-Oxley act, like most things, has its pros and cons. It is costly; studies have shown that this act has cost companies millions of

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.