Essay On Sarbanes-Oxley Act

The internal control practice of separation of duties failed to prevent the fraudulent reporting since various players were committing the scam. The CEO plus the CFO of the Automation Company were both aware of the controller's false revenues. The company had separation of duties meaning that one person was not doing all the financial reporting for the entire finance department. Nevertheless, more than one individual was checking the financial revenue statements reported to the stakeholders. However, no one did anything to stop the fraudulent information from being disclosed. Regardless of the distasteful outcome business ethics was not enforced nor was the consideration of the Sarbanes-Oxley Act.

Throughout history and in our own time, legitimate accounting methods have been utilized to fraudulently engage in manipulating activities that results in illicit gains to the perpetrators and losses to individuals and financial institutions.

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.

Unfortunately, all those efforts have not been vindicated because of the following reasons: Accounting did not cause the recent corporate scandals such as Enron and WorldCom. Unreliable financial statements were the results of management decisions, fraudulent or otherwise. To blame management’s misdeeds on fraudulent financial statements casts accountants as the scapegoats and misses the real issue. Reliable financial reports rely to a certain extent on effective internal controls, but effective internal controls rely to a large extent on a reliable management system coupled with strong corporate governance. when management deliberately or even unlawfully manipulates business processes in order to achieve desirable financial goals and present untruthful financial reports to the public, accounting systems are abused and victims rather than perpetrators.

The Sarbanes-Oxley Act (SOX) of 2002 was implemented to deter fraudulent activities amongst companies by monitoring and auditing financial activities as well as set up internal controls to aid in the safeguard of company funds and investor’s interest. SOX also regulates the non-audit tax services (NATS) that can be performed by an auditing firm. SOX was passed by Congress in 2002 in an attempt to address the unethical behaviors of corporate firms such as Enron, WorldCom, Sunbeam, and others (Raabe, Whittenburg, Sanders, & Sawyers, 2015). Raabe et al. (2015) continues explaining that SOX was created in response to the inadequacies

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

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

Part 1 of Sarbanes Oxley created the Public Company Accounting Oversight Board, which oversaw the audit of public companies, established auditing report standards and rules, and investigated, inspected, and enforced compliance with these rules (Jennings, 2015). Auditing companies must

The Sarbanes-Oxley Act has many provisions. A few of the major provisions include the creation of the Public Company Oversight Board (PCAOB), Section 201, 203, 204, 302, 404, 809, 902, and 906. The PCAOB was the first true oversight of the accounting industry. It oversees and creates regulations, and it will monitor and investigate audits and auditors of public companies. The PCAOB has the authority to sanction firms and individuals for violations of laws, regulations, and rules. Section 302 requires the CEO and CFO to certify that they reviewed the financial statements, and that they are presented fairly. Section 404 requires management to state whether internal control procedures are adequate and effective, and requires an auditor to attest to the accuracy of the statement. Section 902 states that “It is a crime for any person to corruptly alter, destroy, mutilate, or conceal any document with the intent to impair the object’s integrity or availability for use in an official

In the wake of the major financial scandals, that occurred in 2001 and 2002 the United States Congress passed the Sarbanes Oxley Act (SOX) of 2002. These financial scandals adversely affected the public’s trust in the stock market, therefore passing the SOX helped investors to regain trust in investing in the stock market. Prior to the SOX being passed “neither management or auditors of publicly traded companies were required to evaluate, audit, or publicly report on the effectiveness of internal controls over financial reporting” (Kinney & Shepardson,

Senators Paul Sarbanes and Michael Oxley were the sponsors of the Sarbanes-Oxley Act of 2002, which represented a tremendous change to federal securities law. The act was signed into law by president George W. Bush who described it as “the most far reaching reforms of American business practices since the time of Franklin Delano Roosevelt1.” After the financial scandals implicating Enron, WorldCom and Global Crossing, the public needed to restore their trust in the public financial statements of the companies and that’s where the SOX Act of 2002 came into place. The act is composed of eleven titles which require numerous reforms to prevent accounting fraud, increase corporate responsibilities, among others.

The Sarbanes-Oxley Act (SOX) was passed by Congress in 2002 as a response to large corporate accounting fraud scandals that resulted from blatant abuse of self-regulation. SOX “is the most far-reaching and significant new federal regulatory statute affecting accountants and governance since the Securities Acts of 1933 and 1934” (Wegman, 2007). The main goal of SOX was to protect investors from fraud by strengthening oversight and improving internal control. In the discussion below are the advantages and disadvantages of SOX as well as an opinion regarding how successful, or unsuccessful, the SOX regulations were for the prevention of fraud and protection of small business.

The Sarbanes-Oxley Act of 2002 (SOX) was enacted into law in 2002 in the wake of corporation financial reporting scandals involving large publicly held companies. SOX instituted new strict financial regulations with the intent of improving accounting practices and protecting investors from corporate misconduct. SOX requires corporate executives to vouch for the accuracy of financial statements, and to institute and monitor effective internal controls over financial reporting. The cost of implementing an effective internal control structure are onerous, and SOX inflicts opportunity costs upon an enterprise as executives have

The benefits of international accounting standards play an important role for accountancy profession, however still risk of complex accounting standards exist. The IASB issues international accounting standards and also financial reporting regulations that are imposed by the EU, and this can lead

We present a summary of these implications in Table 1. The literature review primarily features research published in academic accounting and auditing journals. In an effort to capture the latest research available—as well as research on emerging topics, such as many of those precipitated by the passage of SOX—we also include working papers submitted to major archiving services. We searched electronic databases such as Ingenta, ABI/Inform, and American Accounting Association (AAA) Electronic Publications using keywords or combinations of keywords related to the various topics and subtopics discussed in this paper. We also searched Social Science Research Network (SSRN) and scholar.google.com to identify relevant working papers. Working papers were included on the basis of the relevance of the research to the audit communication process and on the assessed reliability of the results and implications. The overall objective is to ensure that the information provided is as relevant, complete, and reliable as possible.