The Sarbanes Oxley Act ( Sox )

1728 WordsApr 23, 20157 Pages
In 2002 the telecommunication company, WorldCom committed one of the biggest accounting scandals of all time. They perpetrated over *1 $3.8 billion in fraud, leading to a loss of 30,000 jobs and $180 billion losses for investors . This is one of the several accounting scandals that led to the passing of Sarbanes-Oxley Act, which introduced the most comprehensive set of new business regulations since the 1930’s. The Sarbanes-Oxley Act (SOX) is an act that was passed by United States Congress in 2002. This act safeguarded investors from the likelihood of fraudulent accounting practices of publicly traded organizations by authorizing strict reforms to advance financial disclosures and prevent accounting frauds. With SOX being an extremely important piece of legislature it is necessary to understand the reasons why SOX was passed, how it was passed, what it entails, the aftermath of the act. To understand the events that lead to SOX passing it is imperative to grasp the business regulations that existed and allowed these accounting scandals to occur. This lenient regulatory environment was a precursor to the accounting scandals that occurred in the early 2000’s. Prior to SOX there was the Securities and Exchange Act of 1934. It created the Securities and Exchange Commission which supervises all publicly traded companies. This act also was created to regulate commerce in stocks, bonds, and other securities. It also required public companies to provide complex

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