The Sarbanes Oxley Act Of 2002

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The Sarbanes-Oxley Act of 2002
Sophie Cook
Houston Baptist University The Sarbanes-Oxley Act 2002 Introduction
In the early 2000s, corporate financial statement fraud was rampant, as companies such as Enron and WorldCom used shady accounting practices to inflate their revenues and hide losses. This led to the introduction of the Sarbanes-Oxley Act of 2002, the most extensive form of accounting reform legislation ever passed. It had many consequences for publicly traded companies and public accounting firms, some of which were positive, while others were detrimental. One of the detrimental impacts, the cost of compliance, was alleviated at least partially by the introduction of Auditing Standard Five in 2007. This paper will examine the time period leading up to the passage of the act, the different parts of the legislation, the introduction of Auditing Standard Five, and the impact on registrants and auditors.
History
In the summer of 2001, questions began to arise about the integrity of Houston energy company Enron’s financial statements. In December, they filed for bankruptcy as their fraud came to light and the United States government froze all of their assets and began prosecuting their executives and their external auditing firm Arthur Anderson (Franzel 2014). Enron was not the only company using accounting loopholes to mislead stockholders though; Global Crossing, Tyco, Aldephia, WorldCom, and Waste Management all underwent investigation for similar

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