The Sarbanes Oxley Act Of 2002

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.

This memorandum discusses a brief history of Pat, his wrongdoings and related action, and the response by the related law enforcement agencies.

Depreciation and depletion are two models of computing financial reports. These techniques are used as adjustments when preparing statements of cash flow within the direct or indirect method. This paper will identify and examine the methods of depreciation and depletion, describe the difference between the methods, and compare and contrast depreciation and depletion as well using scholarly references to support the points.

The Sarbanes-Oxley Act of 2002Introduction2001-2002 was marked by the Arthur Andersen accounting scandal and the collapse of Enron and WorldCom. Corporate reforms were demanded by the government, the investors and the American public to prevent similar future occurrences. Viewed to be largely a result of failed or poor governance, insufficient disclosure practices, and a lack of satisfactory internal controls, in 2002 George W. Bush signed into law the Sarbanes-Oxley Act that became effective on July 30, 2002. Congress was seeking to set standards and guarantee the accuracy of financial reports.

In this paper, I will be discussing the Sarbanes-Oxley Act of 2002. I will divide the paper up into four sections: the history of the act, trace its implementation, discuss its impact on society, and analyze the efficiency of the act. The act itself is made of of 11 sections or “titles”. Each title is a major key point in the act which also goes into more depth by containing several sections within it. This paper will me going over all of the sections covered in the act, but will focus on the major sections that have proven this act to be efficient in its purpose and the negatives as well. This act has been quite controversial regarding its strengths and weaknesses, but it contains some key values that should be used as a

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 are put in line to conduct themselves in a manner that promotes public trust. Through defining a code of ethics, organizations can follow, market becomes fair for investors to have confidence in the integrity of the disclosures and financial reports given to them. The code of ethics include “the promotion of honest and ethical conduct, requiring 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 Sarbanes-Oxley Act was signed into law from public demand for a reform. Even though there are some criticism about it, the act still stands to prevent and punish corporate fraud and malpractice.

Congress established the Sarbanes-Oxley Act of 2002, which is otherwise called the Public Company Accounting Reform and Investor Protection Act, in the beginning of corporate and accounting scandals that prompted liquidations, serious stock misfortunes, and a loss of trust in stocks (Batten, 2010). The demonstration forces new obligations on corporate administration and criminal authorizes on those supervisors who spurn the law, and it

On July 30, 2002, The Sarbanes-Oxley Act of 2002 (SOX) was signed into law by President Bush. "The Act mandated some reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud" (SEC.Gov. 2013 P. 1). The SOX Act also created the Public Company Accounting Oversight Board (PCAOB) in response to numerous failures of the profession to fulfill its trusted role; to oversee the activities of the auditing profession (SEC.Gov, 2013. The auditing of financial statements is required for the protection of public investors; however the question that arises is whether or not all PCAOB members should be taken from the investments communities that use audited financial statements. The remaining of this

On July 30, 2002, the Sarbanes-Oxley Act of 2002 was signed into law by the acting President George W. Bush. The overall purpose of the Act was “to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.” (SEC, 2013) This Act mandated multiple amendments to improve corporate responsibility, enhance financial disclosures, and combat corporate and accounting fraudulent practices. One requirement of the Act involves a management’s report on internal controls over financial reporting to be included in the annual financial reports of a company. On July 30, 2014, the Securities and Exchange Commission (SEC) announced that CEO Marc Sherman and former CFO Edward L. Cummings of a computer equipment company named QSGI, Inc. are being charged with misrepresenting the state of its internal controls over financial reporting to external auditors and the investing public. Inadequate internal control within the company can be extremely detrimental because investors and lenders rely heavily on financial reports to make decisions. The incorrect records of QSGI enabled the company to maximize loans from their top creditor. This report will show how QSGI’s lack of internal controls hindered their ability to generate revenue and maintain one of the company’s operation centers.

Foremost, a company hires an auditor to preform an audit. He/she is paid $1,000,000 dollars for their services. In addition, the company is willing to pay the auditor an additional $700,000 for providing more services. This additional pay may stem from the auditor’s friendly relationship with the company’s management. This scenario could potentially cause a huge ethical dilemma for the auditor. Given the friendship between the two parties, the auditor could very well be tempted to “cook the books” by management. This could very well happen if the company needs to improve their company’s earnings. Friendship combined with lofty pay could easily persuade the auditor into disregarding the GAAP as well as the Sarbanes-Oxley Act of 2002. Furthermore, the nature of the job is highly unethical. As it violates several provisions of the aforementioned Sarbanes-Oxley Act. The auditor, management, and the top executives of the company will all be affected by this ethical dilemma.

The Sarbanes-Oxley Act was passed in 2002 as a response to a wave of corporate accounting scandals that damaged public trust in the controls of the US financial system. SOX therefore was created in order to create the framework for better control over accounting information and better accountability among members of senior management. Damianides (2006) notes that much of the burden of providing these tighter controls has fallen to IT departments. The Act not only sets out prescriptions for tighter internal controls, but effectively mandates that senior IT managers will need to communicate those controls to their CFO and CEO, as well as to external auditors.

New levels of auditor independence and personal accountability for CEOs and CFOs are provided by the Act. Additional accountability for corporate Boards, as well as increased criminal and civil penalties for securities violations, increased disclosure regarding executive compensation, insider trading and financial statements are also presented under SOX. (The Institute of Internal Auditors: “The Sarbanes-Oxley Act of 2002: Effect on Audit Committees at Organization Not Publicly Traded.” January 2004. Accessed May 31, 2012 from: http://www.itaudit.org/)

Prior to 2002, financial statement reporting for publically traded companies within the United States was overseen with far less oversight in comparison to current reporting standards and procedures. Appropriate financial reporting is merely one element that was not occurring prior to 2002. An element of corporate dishonesty and deception existed within some the largest publically traded companies and this idea of deceitfulness was perpetuated by the executive staff of the businesses. Enron’s financial disintegration became the facilitator for the need of more rigid financial oversight, but they were not the only company that added to the idea of corporate fraud.

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

I think that the Sarbanes Oxley Act of 2002 (SOX) has been feasible in managing tricky financial reporting from major corporations. It has a much lower influence on the misappropriation of benefits. No law or Act have the ability to cover all human predisposition to endeavor relationships with good offense. The law made it harder to quote out of context the association's cash related affairs and made the results more extraordinary (Ferrell, Fraedrich, & Ferrell, 2013). SOX have increased auditor’s vigilance and tightened management's responsibility for reporting misappropriating assets (Church & Shefchik, 2012). Here are two reasons I trust SOX was successful. First, this Act was powerful enough to cause chief executives to consider money