In the past, many corporate executive have committed various forms scandals in their organizations. Such fraudulent arts are unethical and immoral behavior. This led the US government to form legislation in order to control fraudulent activities; mostly performed by senior officers in the organization. In view of this, this paper will address the following: historical summary on SOX enactment, the key ethical components of SOX, social responsibility implications regarding mandatory publication of corporate ethics, whether the criticisms of SOX implication presents an unfair burden on smaller organizations and suggestions on the improvement of SOX legislation.
Brief Historical Summary on SOX Enactment The Sarbanes-Oxley Act was introduced by Senator Paul Sarbanes, a Democrat from Maryland and Congressman Michael Oxley, a Republican from Ohio. President George W. Bush signed the bill into law in July 30, 2002. 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 Act, enacted by the United States congress is aimed at protecting investors. The protection is provided by improving the accuracy and reliability of corporate disclosures.
Unfortunately, the creation of SOX and a code of ethics in no way guarantee’s that everyone will follow the rules; people will always find a way to circumvent the system or misrepresent the code’s intentions. Even the most robust ethics program needs constant oversight to remain effective. The pressure to increase profits and market share can lead executives to push the boundaries of ethical business behavior. Despite the passage of SOX, some of the largest and most well-established companies are currently crossing those boundaries.
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 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 (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
Over the last decade, headlines have told stories of unethical behavior from corporations such as Enron, Worldcom, Boeing, Xerox, and Rite Aid. As business continued to grow, so has the laws and regulations that govern corporations to make sure they continue to practices their business legally and ethically. Rules and regulations are made because of the unethical practices that corporations have made due to greed and power.
The Sarbanes-Oxley Act of 2002 (SOX) was passed by U.S congress in 2002 to protect investors from fraudulent accounting activities by corporations. Whether the organization is big or small, the act mandates strict reforms to improve financial disclosures from corporations, helping to prevent accounting fraud. It is a federal law that established new and expanded requirements for all U.S. public company boards, management, public accounting firm's, as well as privately held companies. SOX requires top management individually certify the accuracy of financial information, and includes penalties for fraudulent financial activity. The bill was enacted in response to a large number of major corporate and accounting scandals the cost of investors
The Sarbanes-Oxley Act of 2002 (SOX) was enacted to bring back public trust in markets. Building trust requires ethics within organizations. Through codes of ethics, organizations conduct themselves in a manner that promotes public trust. Through defining a code of ethics, organizations can follow, the market becomes fair for investors to have confidence in the integrity of the disclosures and financial reports given to them. The code of ethics includes the promotion of honest and ethical conduct. This code requires disclosure on the codes that apply to senior financial officers and including provisions to encourage whistle blowing, a Business Ethics Perspective on Sarbanes-Oxley and the Organizational Sentencing Guidelines. The Congress signed the Sarbanes-Oxley Act into law in response to the public demand for reform. Even though there is some criticism of it, the act still stands to prevent and punish corporate fraud and malpractice.
The focus of this week’s assignment is the Sarbanes-Oxley (SOX) Act of 2002. A brief historical summary of SOX will be presented, including the events leading up to its passage. The key ethical components of SOX will be identified and explained. The social responsibility implications of the mandatory publication of corporate ethics will be assessed. One of the main criticisms of SOX has been its implementation costs, and this specific criticism will be addressed in regards to smaller organizations. Finally, potential improvements to the SOX legislation will be explored, based on existing research in this area.
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
The new Sarbanes-Oxley Act passed with flying colors. In the Senate it passed unanimously 99 to 0, while in the House of Representatives it passed 423 in favor, 3 opposed, and 8 abstaining. Later that year, on July 30, 2002, President George W. Bush signed off on it making it a law.
The company has an obligation to their clients to protect their information and prevented their employees from committing fraud against their customers. Per Burnoski (2015) “When things are going well, people don’t really think about fraud, and that’s a good opportunity for certain motivated people to commit fraud (Burnoski, 2015).” During the years that the employees and managers were conspiring to boost their sales goals and hit unrealistic quotas should have been a red flag for companies to perform an audit. The CEOs knew when they set the goals that were pushed to the sales team, the goals were extremely hard to obtain. Once they realized several teams across the company were making their sales quota, an investigation should have been launched.
After the quick demise of Enron, governing and regulating businesses had to modify so that such an event like this would never happen again. Once Enron was exposed, a new federal law came into place known as the Sarbanes Oxley Act (SOX) . This law aims to public accounting firms that participate in audits for other corporations to ensure corporations are following accurate accounting practices and reliability of appropriate disclosures. SOX also strengthens corporate governance rules, requirements needed to report to shareholders, strengthening whistleblowers, increasing penalties for any dishonesty and holding executives accountable.
The Sarbanes-Oxley Act (SOX) was enacted in July 30, 2002, by Congress to protect shareholders and the general
This paper provides an in-depth evaluation of Sarbanes-Oxley Act, which is said to be promoted to produce change in the corporate environment, in general, by stressing issues of public accountability and disclosure in the financial operations of business. It explains how this is an Act that represents the government's and the Security and Exchange Commission's concern in promoting ethical standards in terms of financial disclosure in the corporate environment.