The Sarbanes-Oxley Act Analysis

In this paper, we will be discussing how Sarbanes Oxley has affected the American business and if it has accomplished its goals. The goal of the Sarbanes-Oxley Act (SOX) is to convey confidence in the stock exchange, but it does not defer all immoral activities that take place on the stock exchange. People no matter the law, are responsible for the quality of their work and are accountable for the integrity of themselves and their company. Their own ethical values can take precedence over those set by Sarbanes-Oxley. Not all values are equal in quality, and a person may go above the rules delegated by Sarbanes-Oxley, however, there is another side. Sarbanes-Oxley has created a fear among business practitioners that this new set of standards

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 of 2002 was implemented and designed to “protect the interests of the investing public” and the “mission is to set and enforce practice standards for a new class of firms registered to audit publicly held companies” (Verschoor, 2012). During the early 2000 's, the world saw an alarming number of accounting scandals take place resulting in many corporations going bankrupt. Some of the major companies involved in these scandals were from Enron, WorldCom, and one of the top five accounting and auditing firms, Arthur Andersen. These companies were dishonest with their financial statements, assuring the public the company was very successful, when in reality they were not. This became a problem because if the public believes a company is doing well, they are more likely to invest in it. That is to say, once these companies were exposed, it caused a number of companies going bankrupt and a major mistrust between the public and the capital market. Consequently, the federal government quickly took action and enacted the Sarbanes-Oxley act of 2002, also known as SOX, which was created by the Public Company Accounting Oversight Board (PCAOB), and the Securities and Exchange Commission (SEC). Many have questioned what Norman Bowie (2004) had questioned,

The Sarbanes Oxley Act is an act passed by the United States Congress to protect investors from the possibility of fraudulent accounting activities by corporation. The Sarbanes Oxley Act has strict reforms to improve financial disclosures from corporations and accounting fraud. The acts goals are designed to ensure that publicly traded corporations document what financial controls they are using and they are certified in doing so. The Sarbanes Oxley Act sets the highest level and most general requirements but it imposes the possibility of criminal penalties for corporate financial officers. The Sarbanes Oxley Act sets provisions that are used throughout numerous amounts of corporations. It holds companies to a larger responsibility and a higher standard with accounting principles and the accuracy of financial statements.

The Sarbanes-Oxley Act, also known as SOX Act, is a federal law that was passed on July 30, 2002, by Congress. This law was established to help set new or enhance laws for all United States accounting firms, management, and public company. The SOX Act would now make corporate executives accountable for their unethical behavior. This bill was passed due to the action of the Enron and Worldcom scandal, which cost their investors billions of dollars, caused their company to fold, and questioned the nations' securities markets.

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 Sarbanes Oxley act of 2002(SOX), also known as the public company accounting reform and investor protection act was enacted as a reaction to a number of major corporate and accounting scandals. These scandals occurred in Enron Corporation, WorldCom, Tyco International, Adelphia and Peregrine Systems. These companies and corporations were looking very financial sound and very attractive to investors. However the investors did not know that the success of these companies were cause by false reports and artificial profits. Which cost investors billions of dollars when their share prices of affected companies collapsed. Also inadequate accounting practices, bankruptcies, accounting irregularities and inefficient audit were part of these frauds

According to HBS Working Knowledge (2014), since the signing of Sarbanes-Oxley Act into law by George W Bush in 2002 the business environment in the United States changed. The act brought transformation in public business in the perspectives of auditing and accounting (Zameeruddin, 2003). The act majorly aimed at deterring as well as punishing corporate fraud and general corruption by recommending strict penalties for perpetrators of these vises.

When revisiting some history where scandals have taken place such as Enron or WorldCom, it became necessary for stronger controls to be put in place and have all people involved held accountable for their actions. It is for this reason that Sarbanes-Oxley Act is in place. It has not stopped fraud from occurring; however, it does create a deterrent. In reading about the Societe Generale fiasco poor IT security is the focal point in this fraud. Stronger security controls will be the only way fraud of this magnitude will not take place again.

The Sarbanes-Oxley (SOX) Act of 2002 was signed into federal law on July 30, 2002. The stated purpose of the law is "to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the security laws, and for other purposes." The law has influenced long term changes in the way publicly traded companies manage auditors, financial reporting, executive responsibility and internal controls. SOX is considered the most substantial piece of corporate regulation since the securities laws of the 1930's (Stults, 2004).

This memo is to address the changes and consequences brought forth by the implementation of the Sarbanes – Oxley Act. The Sarbanes – Oxley Act was signed into law in efforts to eradicate company misconduct and protect public confidence by regulating management, accountants and legal counsel that represent the company (Noorishad, 2005). When passing the Sarbanes – Oxley Act, Congress also planned to protect whistleblowers because it is those who work in the organizations every day that see first-hand the indiscretions that frequently end in substantial corporate fraud (Watnick, 2007).

Part of the daily routine during childhood is learning the difference between right and wrong, and a child’s behavior will change as they grow older, which proves they understand being dishonest or lying is wrong and there will be consequences to pay. Regardless of a person’s surroundings, they should never put their integrity in jeopardy, however, more often than not greed prevails as the winner. Most people do not accept a position within an organization looking to become rich, seek sexual favors, or be corrupt. The temptation is in every organization and those who cannot resist temptation become Gonin, Palazzo, and Hoffrage (2012) the actors, who fill the role and offer solutions through their evil persuasiveness demeanor. These types of people are the reason for the Sarbanes-Oxley (SOX) Act and more government regulations on businesses and money deals. Those who keep their

The Sarbanes-Oxley Act was enacted by Congress in 2002 in response to accounting fraud scandals involving several large corporations including Enron, WorldCom, HealthSouth and Tyco. (Reed, Pagnattaro, Cahoy, Shedd, & Morehead, 2013) The bill’s purpose was to protect investors from accounting fraud by mandating strict reforms in financial disclosures, appointing an audit oversight board (PCAOB), and increasing the SEC’s power regarding governance issues. Although there have been some mixed feelings regarding the implementation of stricter government controls through legislation, the forced compliance seems to have largely had a positive impact on the auditing procedure. (Reed, Pagnattaro, Cahoy, Shedd, & Morehead, 2013)

To protect investors from the possibility of fraudulent accounting activities by corporations, the Sarbanes-Oxley Act of 2002 (SOX) was passed by U.S. Congress in 2002. Under SOX, TITLE II—AUDITOR INDEPENDENCE as a independence standard to guide external auditors.

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