Sarbanes Oxley Is An Act That Was Enacted

In this paper, we will be discussing how Sarbanes Oxley has affected the American business and if it has accomplished its goals. The goal of the Sarbanes-Oxley Act (SOX) is to convey confidence in the stock exchange, but it does not defer all immoral activities that take place on the stock exchange. People no matter the law, are responsible for the quality of their work and are accountable for the integrity of themselves and their company. Their own ethical values can take precedence over those set by Sarbanes-Oxley. Not all values are equal in quality, and a person may go above the rules delegated by Sarbanes-Oxley, however, there is another side. Sarbanes-Oxley has created a fear among business practitioners that this new set of standards

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.

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 is the most important piece of legislation since the 1933 and 34 securities exchange act, affecting everything from corporate governance to the accounting industry and much more. This law was in direct response to the failure of corporate governance at Enron, Tyco, and WorldCom. The Sarbanes - Oxley seeks to bring back the confidence in all publicly held corporations to the shareholders, while placing more responsibility on CEOs and CFOs for the actions of the corporation. "Sarbanes - Oxley is more than just another piece of legislation - it has become synonymous with a new culture of corporate accountability and reform1." The SOX, as it has come to be known, covers a myriad amount of corporate

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)

New levels of auditor independence and personal accountability for CEOs and CFOs are provided by the Act. Additional accountability for corporate Boards, as well as increased criminal and civil penalties for securities violations, increased disclosure regarding executive compensation, insider trading and financial statements are also presented under SOX. (The Institute of Internal Auditors: “The Sarbanes-Oxley Act of 2002: Effect on Audit Committees at Organization Not Publicly Traded.” January 2004. Accessed May 31, 2012 from: http://www.itaudit.org/)

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

Although the Sarbanes-Oxley (SOX) Act comes with many different benefits, the Act itself still consists of any major pros and cons. The SOX Act must review what needed to fix or changed due to the unfair to small companies. Therefore, it should be considering making improvements to other areas to ensures fair practices. Like many major businesses guidelines, the SOX Act should do its part to push to prevent conflict of interest. Although it has made significant improvement on the reliability of financial reporting for public traded companies and helping investors in today business world. It still need to assures the auditing process is fair and consistent to tighten the awareness of unethical practices. The SOX Act has already put major company

The Sarbanes-Oxley Act (SOX), implemented in 2002, was created to enhance U.S. public company’s auditing (Coates and Srinivasan 628). SOX had two core goals in its implementation, one was to “create a quasi-public institution to oversee and regulate auditing (PCAOB),” and the other was “to enlist auditors more extensively in the enforcement of existing laws against theft and fraud by corporate officers, pursuant to regulations from and enforced by PCAOB” (Coates and Srinivasan 628-629). To accomplish these core goals, “new rules concerning the relationship between public companies and their auditors” were created (Coates and Srinivasan 629). However, to fully understand the changes SOX has made, we must first look at the world before SOX.

Sarbanes-Oxley was one of the most important changes to the legal structure of financial accounting in the last century. The corporate scandals that led to its creation were the Enron Corporation and Worldcom scandals. These scandals included everything from misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of corporate assets and last, but not least, underreporting liabilities and participating in security frauds. Congress eventually passed The Sarbanes-Oxley Act of 2002 which provides provisions growing oversight of public accounting firms, giving informers protections for the employees who assist with investigating behaviors that violates federal and state laws by imposing civil and criminal

It has been a decade since the Sarbanes-Oxley Act became in effect. Obviously, the SOX Act which aimed at increasing the confidence in the US capital market really has had a profound influence on public companies and public accounting firms. However, after Enron scandal which triggered the issue of SOX Act, public company lawsuits due to fraud still emerged one after another. As such, the efficacy of the 11-year-old Act has continually been questioned by professionals and public. In addition, the controversy about the cost and benefit of Sarbanes-Oxley Act has never stopped.

In order to protect a company or a business it relies that each quarterly report financial issues has to be authorized and confirmed by the executive officer or chief financial officer. Therefore, companies are required to have an internal auditor that is certified by an external auditor. The Sarbanes-Oxley Act or SOX affects not only the financial corporations, but also IT departments that are in charge of storing electronic records for companies. The act states that the records should not be

The Sarbanes-Oxley Act has a direct effect on corporate governance, and it is the strengthening of audit committees at public companies. This audit committee members oversees the company’s the management accounting decisions and gain new responsibilities such as approving numerous audit and non-audit services, selecting and overseeing external auditors, and handling complaints regarding the management’s accounting practices (Blokhin, 2015). There has been increased attention to corporate governance resulted from the passage the Sarbanes-Oxley Act; therefore, this paper is going to address about three ways, management oversight, internal control, and ethical conduct, which are responsible for a company’s accounting information have been affected.

audit committee must include a member who is a financial expert. A financial expert is

The Sarbanes-Oxley Act was enacted by Congress in 2002 in response to accounting fraud scandals involving several large corporations including Enron, WorldCom, HealthSouth and Tyco. (Reed, Pagnattaro, Cahoy, Shedd, & Morehead, 2013) The bill’s purpose was to protect investors from accounting fraud by mandating strict reforms in financial disclosures, appointing an audit oversight board (PCAOB), and increasing the SEC’s power regarding governance issues. Although there have been some mixed feelings regarding the implementation of stricter government controls through legislation, the forced compliance seems to have largely had a positive impact on the auditing procedure. (Reed, Pagnattaro, Cahoy, Shedd, & Morehead, 2013)