Sarbanes Oxley SOX - Effective Governance Essay

Enron was an energy trading and communications company located in Houston, Texas. During 1996-2001 Enron was given the name of America’s Most Innovative Company by Fortune magazine as it was the seventh-largest corporation in the US. The problem that led this company to bankruptcy was due to the fact that fraudulent accounting practices took place allowing Enron to overstate their earnings and tuck away their high debt liabilities in order to have a more appealing balance sheet (Forbes.com, 2002). Enron’s accounting team “cooked” the books to every meaning of the word so that their investors would not see anything wrong with the failing organization. This poorly structured company led people to jail time, unemployment, and caused retirement stocks to be dried up. Enron had a social responsibility to its stockholders and rather than being up front and honest about the failing company they hid every financial flaw in order to keep receiving money from its investors. By Enron not keeping a social

Corporate and Criminal Fraud Accountability Act of 2002 – consists of seven sections that describes the stiff criminal penalties associated with being guilty of manipulating, destroying or altering of financial records or otherwise interfering with investigations.

According to Koehn and Vecchio the SOX Act was the most significant change to security laws since 1934. The popular and financial press has identified certain intended and unforeseen consequences, such as: contraction of the audit market,

The Sarbanes-Oxley (SOX) act was passed into law in 2002. It was created in response to major financial scandals that largely shook the public's confidence in corporate accounting practices. It was a significant response to improper record handling techniques. Under the law, corporate managers must assess whether they have sufficient safeguards to catch fraud and bookkeeping errors. There are consequences for not complying with the provisions of the act and there are certainly advocates and opponents of it. Price Waterhouse Coopers says "Without a doubt, the Sarbanes-Oxley Act is the single most important piece of legislation affecting corporate governance, financial disclosure and the practice of public

It affects the businesses by making the corporate officers can interact with the auditors. The act gives more independence to outside auditors as well. With the new act every business should know that every financial statement they produce should be valid and able to be backed up. Businesses can no longer get off the hook for simply not knowing that they were

The following was an Act passed by U.S. Congress in 2002 in response to a loss of confidence among American investors suggestive of the Great Depression; President George W. Bush signed the Sarbanes-Oxley Act into law on July 30, 2002. SOX as the law was quickly entitled, was planned to guarantee the reliability of publicly reported financial information and reinforce confidence in U.S. capital markets. SOX contains expansive duties and penalties for corporate boards, executives, directors, auditors, attorneys, and securities analysts. SOX works to protect investors from the possibility of fraudulent accounting activities by corporations. The Act mandated a number of reforms to improve corporate responsibility, improve financial disclosures

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.

Also, all companies must implement an accounting system that provides “reasonable assurance” that all transactions entered are accounted and legal. Any person making false statements or altering accounting books will be in violation of the law. This part of the law was writing to help with the detecting of bribery. This is also something that was done in the past, where higher officials in a company would either force or pay an accountant to make false accounts in the books.

A seven-year retention period for audits work papers, second partner review and approval, evaluation of whether internal control structure and procedures include records that accurately reflect transactions and dispositions of

Furthermore, according to soxlaw.com an online guide to the Sarbanes-Oxley Act the major compliances to the act rest on 5 sections:

With this legislation, investors should have a little bit more peace of mind. Before the act took effect, investors were starting to lose faith in the system. Many companies had purposely deceived their investors. Investors did not know whether they could trust the information that was provided to them.

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.

For just a brief moment, imagine yourself sometime in the future. You have been recently married, you just started a brand new job, and are looking to start a family. As a way to plan for financial security, you have done some research into financial investments. You are hoping to build a portfolio, which will be a mix of low, median, and high-risk stock. Flash forward into the future by 20 years. During this time, the stock prices have appreciated and depreciated, yet overall done remarkably well. All of a sudden, one morning you wake up to some disastrous news. One of the company’s you invested in, which held a majority of the portfolio of stock, has been participating in financial fraud. While they had been presenting themselves well, under the surface deceptive accounting and financial practices were being used and now the company is broke. All of your hard earned money which was invested in that company is now gone-down to the last penny. Does this sound vaguely familiar? It should. In 2001, Enron, a United States company, became the very largest bankruptcy and stock collapse in history (Columbia Electronic Encyclopedia). As a result, in 2002, The Sarbanes-Oxley Act was passed as means to prevent fraud, improve financial reporting, and gain back the trust that was previously lost by investors. Although numerous publicly traded companies, which are companies registered on the U.S. stock exchange, were less than happy to welcome

Most of the world has heard of Enron, the American, mega-energy company that “cooked their books” ( ) and cost their investors billions of dollars in lost earnings and retirement funds. While much of the controversy surrounding the Enron scandal focused on the losses of investors, unethical practices of executives and questionable accounting tactics, there were many others within close proximity to the turmoil. It begs the question- who was really at fault and what has been done to prevent it from happening again?