The SOX Act Case Study

The Enron and WorldCom scandals were arguably the incidents that permanently changed the procedures for accounting controls. In response to these incidents, the Sarbanes-Oxley Act (SOX) of 2002 was passed. Once the knowledge of these scandals was made public, a number of subsequent accounting scandals were discovered in public companies such as Tyco International, HealthSouth, and American Insurance Group. In addition, a then-employee-owned company, Post, Buckley, Schuh & Jernigan, Inc. (dba PBS&J, now known as “Atkins North America, Inc.”), was also hit by a similar accounting scandal. Henceforth, a case study of PBS&J is presented where we will examine the fraudulent transactions that

Our project team analyzed the Fraud and Illegal Acts Case (True blood Case Studies- Case 08-9), which involves a questionable sales transaction made between Jersey Johnnie’s Surfboard, an SEC registrant, and Mr. Sinaloa, an independent sales representative of the company. As a simplified overview of the case, an external audit firm was hired on to perform a year-end audit of Jersey Johnnie’s Surfboards, Inc. Towards the end of the audit, the engagement partner notified the auditors that there could be a possibility of fraud and illegal acts made by the company.

In improving a publicly traded company’s bottom line Sarbanes-Oxley can be a positive factor. By introducing ethics codes and internal controls and building an ethical mind-set in a

The purpose of this memo is to provide you with information on the Sarbanes-Oxley Act of 2002 (SOX Act) and to describe the importance of its implementation, per your request. The SOX Act was first introduced in the house as the “Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002” by Michael Oxley on February 14, 2002. Paul Sarbanes, a Democrat U.S. Senator, collaborated with Mr. Oxley, a Republican US Senator, creating significant bipartisan support. The SOX Act was enacted by the end of July 2002 in response to recent corporate accounting scandals. The twin scandals that were impetus for the legislation involved the corporations of Enron and WorldCom.

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.

An implicit theme of this case that I want students to recognize is the contrast between the persistent and vigorous efforts of David Sokol to “get to the bottom” of the suspicious items he uncovered in JWP’s accounting records versus what Judge William Conner referred to as the “spinelessness” of JWP’s auditors. The JWP audits were similar to most problem audits in that the auditors encountered numerous red flags and questionable entries in the client’s accounting records but, for whatever reason, apparently failed to thoroughly investigate those items. On the other hand, Sokol refused to be deterred in his investigation of the troubling accounting issues that he discovered. The relationships that existed between members of JWP’s accounting staff and the Ernst & Young audit team apparently influenced the outcome of the JWP audits. Of course, the Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley (SOX) Act was passed by Congress in 2002 to address issues in auditing, corporate governance and capital markets that Congress believed existed. These deficiencies let to several cases of accounting irregularities and securities fraud. According to the Student Guide to the Sarbanes-Oxley Act many changes were made to securities law. A new federal agency was created, the entire accounting industry was restructured, Wall Street practices were reformed, corporate governance procedures were changed and stiffer penalties were given for insider trading and obstruction of justice (Prentice & Bredeson, 2010). Tenet Healthcare Corporation, one of the largest publicly traded healthcare companies in the US at the time, was accused

As aforementioned, the Sarbanes Oxley Act’s requirements reduced fraud and increased corporate governance across both for-profit and not-for-profit organizations. That said, the SOX act has, in my opinion, been absolutely effective in regulating ethical behavior among for-profit as well as not-for-profit health organizations. The establishment of this law has contributed greatly to the investigations of fraud among health care organizations. According to attorneys at Post and Schell, several federal, criminal investigations have been started after the law’s enactment, making it clear that healthcare organizations were within the same scope of corporate governance and would not be immune from the same criminal prosecution. In 2003, United Memorial Hospital in Michigan—a not-for-profit healthcare organization—signed a guilty plea in federal court admitting to fraud for over use of pain management surgical procedures after the death of a patient. Even though sentencing has been deferred, this admittance of and plea agreement contained many of the corporate “not-tos” from the board down. The system of reporting for the hospital, its internal audit investigation, conflict of interest disclosures and response to complaints were all held as objects of interrogation (Levine & Short, 2004).

The first one is the Sarbanes-Oxley section 302, which is found under Title III of the act, pertaining 'Corporate Responsibility for Financial Reports'.

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

As laws and regulations continue to grow and become more complex, the need for forensic accountants is sure to continue growing as well. An example of how regulations have grown (mirroring the demand for forensic accountants) can be seen by comparing the scope and length of the Sarbanes-Oxley Act of 2002, at 66 pages, to the 849 page Dodd-Frank Wall Street Reform and Consumer Protection act of 2009.(Tucker, 2011) It is the environment created by such complex regulations and oversight committees that has hedged the need for accounting experts who can help demonstrate both the effects of individual companies on overall markets, as well as the opposite effects of market-happenings on individual firms. This complicated data, made comprehendible by a talented and effective forensic accountant, can serve as the determining factor in a case. Ultimately, this allows for

Fraudulent, erroneous, and illegal acts committed by a public company, usually at a managerial or executive level, have been a very serious problem for many years and have prompted development of strict and updated regulations, such as the Sarbanes-Oxley Act, in an attempt to prevent these occurrences. Unfortunately, these new or updated regulations are not enough to prevent these acts from happening, thus not alleviating the auditors of their responsibility to detect fraud. Some methods that management and auditors can employ to prevent and detect fraud, errors, and illegal acts are: improving knowledge, improving skills,

As the WMI accounting fraud case shows, change exposes organizations to considerable financial fraud risks. The top officials used acquisitions and merger as means to perpetuate this fraud. This financial fraud took place due to the organizational breakdown of internal and external audit controls. As a result, the top management was able to commit this massive fraud without facing any resistance. It never occurred to them that they were violating the law because what mattered to them was pocketing as much as they could.

First and most important, I would say that the benefit for having the SOX is data integrity. SOX ensures through several layers of requirements that information published to investors is accurate and reliable. Information is also routed through external auditors guaranteeing compliance with SEC standards. SOX also imposes CEO’s participation in financial reports with penalties for any fraudulent declaration. I dare to say that Enron investors would rather afford the cost of SOX than lose their entire funds. Thus, SOX compliance is for the best interest and protection of the investors. With reliable information on hand investors can make sound decisions about their

Cable provider Adelphia was one of the major accounting scandals of the early 2000s that led to the creation of the Sarbanes-Oxley Act. A key provision of the Act was to create a stronger ethical climate in the auditing profession, a consequence of the apparent role that auditors played in some of the scandals. SOX mandated that auditors cannot audit the same companies for which they provide consulting services, as this link was perceived to result in audit teams being pressured to perform lax audits in order to secure more consulting business from the clients. There were other provisions in SOX that increased the regulatory burden on the auditing profession in response to lax auditing practices in scandals like Adelphia (McConnell & Banks, 2003). This paper will address the Adelphia scandal as it relates to the auditors, and the deontological ethics of the situation.