Sarbanes-Oxley-Context And Theoretical Analysis

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

Sarbanes-Oxley was put in place after accounting scandals left many investors questioning whether corporation’s financial reporting could be trusted enough to invest in. The ability to report pretty much anything in their financial statements left those investing in a vulnerable position. The new laws that governing accounting procedures and financial reporting have made investors more likely to invest knowing that the figures that they are basing their investment on closer to the truth of the company’s finances. Calling for an outside auditor to validate the financial statements made sure that company’s reported the true actions of the company leaving most feel more secure in their investment.

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

In the corporate world today the rules and regulations are stricter than they were in early 2000. The development of corporate governance that established procedures to be used by officers and directors for lines of responsibility, approval, oversight by key stockholders, and set the rules for corporate decision making became more extreme. The Sarbanes-Oxley Act (SOX) of 2002 made the use of ethical decision making more prominent in today's business environment. The SOX Act established the penalties for both criminal and civil charges as well as those in the corporate world are not protected. The term "piercing the corporate veil"

What is The Sarbanes-Oxley Act? “With more than half of all American households invested in U.S. public companies, the discoveries of financial reporting and auditing improprieties at Enron and numerous other public companies beginning five years ago swelled in 2002 to a national crisis in confidence in the integrity and reliability of public companies’ financial statements and of external audits.” This act of 2002 is a legislation passed by the U.S. Congress to guard shareholders and the general public against accounting errors and fraudulent practices in the enterprise, as well as improve the accuracy of corporate disclosures. SOX defines individual accountability and requires employees to construct an investigation of a business or person before signing a

On July 30, 2002, George Bush signed into law the Sarbanes-Oxley Act. This act was a product of the collapse of major corporations such as Enron, Global Crossing, Adelphia, and WorldCom. “All four companies allegedly hid their true financial conditions from creditors and shareholders until an inability to meet financial commitments forced these companies to restate earnings and reveal massive losses. The financial collapse of these corporations, a result of allegedly fraudulent accounting practices, created a ripple effect that weakened a stock market already deflated by both the bursting of the technology bubble in 2000 and investor uncertainty resulting from the terrorist attacks of September 11, 2001(Recine, 2002).” In order to prevent

The Sarbanes Oxley Act was approved and activated in 2002 to protect investors and to renew confidence in American companies from what happened with the fall of companies like Enron, HealthSouth, and WorldCom. This act was trusted to fix or find corruption in the companies and make them liable for their unethical activities. Although this act has proven to have many benefits, the cost of complying with the act for some companies has been much greater than expected. There are also negative

The Sarbanes-Oxley Act, frequently known as the SOX. The act was passed on in 2002 as a federal United States law. The law was drafted in response to the numerous numbers of financial scandals performed by high profile corporations such as Johnson & Johnson. The action has created a new company standard of responsibility in order to protect the valued stakeholders, as well as the public, from the deceitful practices of various organizations. The Sarbanes-Oxley Act

The Sarbanes Oxley Act was approved and activated in 2002 to protect investors and to renew confidence in American companies from what happened with the fall of companies like Enron, HealthSouth, and WorldCom. This act was trusted to fix or find corruption in the companies and make them liable for their unethical activities. Although this act has proven to have many benefits, the cost of complying with the act for some companies has been much greater than expected. There are also negative effects of the Sarbanes Oxley Act that have been felt by not only companies, but investors in stock and consumers. With all this being said it lead to many asking the best question of all which was, Do the costs outweigh the benefits? The SOX Act was passed to improve the accountability of managers to shareholders however companies are finding the compliance costly, and are starting to question the true balance of the cost verses the benefits.

Global bribery scandals in the 1970s brought about the first developmental period of codes (Messikomer & Cirka, 2010, p. 57). Later, after the public discomfort towards continuous ethical lapses of major U.S. corporations, the United States Congress enacted the Sarbanes-Oxley Act of 2002 on July 29, 2002. This Act required American companies to reveal whether it has adopted a code of ethics (McCraw, Moffeit, & O’Malley, 2008; Schwartz, 2004). In this Act, the term ‘‘code of ethics’’ referred to written standards that are designed to deter wrongdoing and to promote

While researching whether or not The Sarbanes–Oxley Act of 2002 (SOX) was the correct decision at the time, there was no lack of information to be found. There are thousands of conflicting articles on both sides of the isle. My thought is, although it has brought to light the need for a higher ethical standard within the accounting industry, to task the government the job of regulating morality simply does not work.

Even though it is a requirement for publicly traded companies, private and nonprofit companies benefit from it as well. Executives and management follow SOX’s practices and benefit from the positive outcomes. Private and nonprofit companies have also improved their documentation system, improved policies and procedures, and updated or added whistleblower policies. Many private and nonprofit companies are implementing SOX requirements to improve their companies’ overall operations. The Sarbanes-Oxley Act therefore has been beneficial not only to publicly traded companies, but also to private and nonprofit companies, improving the accounting system in

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

The Sarbanes-Oxley Act, enacted as a reaction to the WorldCom, Enron, and other corporate scandals, improved the regulatory protections presented to U.S. investors by adding an audit committee requirement, intensification of auditor independence, increasing disclosure requirements, prohibiting loans to executives, adding a certification requirement, and strengthening criminal and civil penalties for violations of securities laws.

The Sarbanes-Oxley Act came about as a way to try and get the trust restored in the stock markets so that people will feel comfortable even after all of the scandals. The Sarbanes-Oxley Act is the first act to attempt restoration from the corporate scandals committed with hopes to restore everyone’s confidence in the stock markets. The Sarbanes-Oxley Act of 2002 (SOX) is a very important part of the new legislation that affects how