The Sarbanes Oxley Act ( Fraud )

During the time of the scandal, which broke in mid-2005, PBS&J had 4,000 employees in 75 offices in 24 states (Barnett, 2007). A number of high-profile projects were under construction with FDOT, OOCEA, and TxDOT. The funds from these projects were being brought into the firm at a rapid rate; however, PBS&J contained a flimsy internal controls system which facilitated the embezzlement that eventually took place. The major players of the scandal were located in the firm’s Miami office. They were Scott DeLoach, then chief financial officer (CFO); Maria Garcia, an accounting employee who was in charge of the office’s database and bank reconciliations; and Rosario Licata, a bookkeeper who maintained the firm’s benefits bank account (Eubanks, 2016).

In addition, associated with the misapplication of accounting methods, the financial industry has been plagued with one disaster after another involving numerous scandals from top leading American companies. Consequently, the Sarbanes-Oxley Act was passed in 2002 compromising eleven sections that are generated to insure the responsibilities of the company’s managers and executives. This act identifies criminal penalties for particular unethical practices and currently has new policies that a corporation must follow in their financial reporting. The following examples describe some of biggest accounting methods as a result of the greed and the outrage of the ethical and financial misconduct by the senior management of public corporations.

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.

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

This shows a major breakdown in managerial controls that a low level employee was able to take steal money over the course of a couple of years without ever being suspected. This is a prime example of why internal controls are so vital and why even the government needs to be audited. Ruiz

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.

White collar crime has been around for ages. Today more and more news stories can be found where the elite, the top executives of fortune 500 companies, are being prosecuted for participating in illegal activities. It was hoped that the passing of the Sarbanes Oxley Act of 2001 after the Enron debacle would reduce the amount of illegal acts being committed in corporate America. The Sarbanes Oxley act makes executives personally responsible for their activities requiring top management to sign off on financial statements stating they are true and accurate and these executives can face jail time for committing fraudulent acts. Unfortunately, immorality in business is still running rampant. One illegal practice we see happening in

Why does society need protection? That is the first question we must ask before we look at the protections that have been afforded through the various legislative acts that have been passed to provide these protections.

However, SOX was not the end of the story. 2008 ushered in, what is now

These funds were also used to pay for the attorneys of five burglars in the Watergate scandal. The corruption and fraud in the secret organization showed the dishonesty of Nixon’s

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.

In this University of California – Berkeley’s Hass School of Business Case, we are aware of money transactions Dean Hasler was processing in order for the school’s professors to have a salary closer to other business school professor’s around the nation and to avoid their leaving to better-paying institutions such as Stanford and Harvard. We are noted through an audit the university completed, that approximately $650,000 were spent in unauthorized supplemental compensation to some faculty members. However, the report did not identify the checks that were given to the faculty members. This large amount was divided amongst 25 workers; some were professors while others were faculty members. An article about this case was later written in the Wall

The Annunzio-Wylie Anti-Money Laundering led to the Suspicious Activity Report (SAR). Financial institutions were prohibited from disclosing to an individual that they were filing a SAR on them. The law also delivered “whistleblower” protection for individuals that file SARs. Substantial penalties were established for banks that were convicted of money laundering. Potential penalties included monetary fines and loss of banking license at the least (Burdett, 2012). The Penalties are starting to turn here and focus more on the white collar or organization committing crime not just the offender. As the mafia, wiseguys, and thugs were running ramped in the street, CEO’s and mid-level management a like where laundering money through their own cooperation on a large scale. Investment Company, Solomon Smith Barney’s own research analyst, Jack Grubman “cooked the books” when making the company reports reflect healthier than they were and ill-advised investors to invest with companies he himself was part of. Grubman cost a number of investor a lot of money and shamed the name of the Citigroup cooperation (Goldstein, 2002). The Annunzio-Wylie Anti-money Laundering Act take action to create the Bank Secrecy Act Advisory Group, thus increasing the sanctions for violation of the Bank Secrecy Act of 1970. In keeping up with advancing times recordkeeping and verification for wire transfers became more

Evidence was obtained showing the two men exchanging emails regarding the intentional misrepresentation of the value of certain assets and the concealment of unreported loans. Fraud accountant Mark Berenblut testified in the U.S. court trial in Houston that “his examination showed two large loan balances on Stanford International Bank’s books -- one for $1.7 billion to Stanford himself and another for $1.8 billion to Stanford-related companies. The examiner testified both items should have been disclosed to investors and were not.” (Calkins & Harris, Stanford Loans Prove Fraud, Lloyd’s Examiner Says,

Therefore this honest diagnosis was met with internal resistance, and it was not until the following year that the most serious revelations came to light. This resulted in the departures of the CEO and Chairman, and the decision by the newly appointed CEO, Peter Löscher, to announce a month-long amnesty for employees to come forward, explicitly excluding, extending the scandal’s reach into the previous management Board. What was especially remarkable was the fact that not individual but systemic elements contributed to this scandal. These include: •