Sarbanes Oxley Outline

Satisfactory Essays

The Ineffectiveness of the Sarbanes Oxley Act
In Corporate Management and Accounting In the early 1990s, a young company named Enron was quickly moving up Fortune magazine’s chart of “America’s Most Innovative Company.” As the corporate world began to herald Enron as the next global leader in business, a dark secret loomed on the horizon of this great energy company. Aggressive entrepreneurs eager to push the company’s stock price higher and a series of fraudulent accounting procedures involving special purpose entities were about to be exposed. In early 2002, the United States Justice Department announced its intent to pursue a criminal investigation into the once mighty company, Enron. After the gross negligence of accounting …show more content…

Passing of Sarbanes by Congress to limit corporate accounting violations. (Sarbanes Oxley Act of 2002)
2. The creation of the Public Company Accounting Oversight Board and its controversial creation. a. The mandatory registration of public accounting firms who prepare audits for public companies. b. The extensive rules given to accounting firms under §103 of Sarbanes Oxley and the complexity of their application. c. How public accounting firms are unable to handle increased auditing and accounting demands by public companies.
3. Increase in expenses for businesses to achieve compliance with Sarbanes standards. a. Inaccurate calculations made by Congress minimizing the costs associated with Sarbanes compliance. (Feeney, T., The Heritage Lectures; No. 995) b. Businesses struggle with the cost of accounting department upgrades for internal audit procedures due to lack of funds. c. The slow destruction of the U.S. economy where companies find more benefits of going public in overseas markets or selling to private equity firms.
4. The controversy surrounding Sarbanes §404 and its application to corporate accounting. (In re Buca Inc. Secs. Litig, 2006) a. The ambiguity Sarbanes §404 presents for corporate management and the relationship of external auditors. (In re Cardinal Health, Inc. Sec. Litigs., 2006) b. The inability for accounting firms to interpret and apply Sarbanes §404 clearly for publicly held corporations.

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