Lack of integrity, incomplete discloser, and unwilling to speak the truth are all scopes of dishonesty (Ferrell, Fraedrich, & Ferrell, 2013). Some businesses prompt and participate in dishonorable activities through unethical behavior. This is the very reason why today’s economy faces financial disaster. The Sarbanes-Oxley Act appears to have a strong grasp on controlling the financial environment in organizations; however, other financial disasters will more than likely hit home. Because these transgressions will emanate additional legislation might greatly prevent future misconducts. For this reason, legislations continue to recover with up-to-date implementations.
The current foundations in place to assess and prevent fraud through
In the past, many corporate executive have committed various forms scandals in their organizations. Such fraudulent arts are unethical and immoral behavior. This led the US government to form legislation in order to control fraudulent activities; mostly performed by senior officers in the organization. In view of this, this paper will address the following: historical summary on SOX enactment, the key ethical components of SOX, social responsibility implications regarding mandatory publication of corporate ethics, whether the criticisms of SOX implication presents an unfair burden on smaller organizations and suggestions on the improvement of SOX legislation.
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
I believe the Sarbanes-Oxley Act of 2002 has been effective in managing the risks exposed through previous corporate fraudulent financial reporting scandals. The Sarbanes-Oxley Act makes fraudulent financial reporting a crime in which strong penalties can be enforced (Ferrell & Ferrell, 2013). This act also protects investors as corporations are required to be transparent with their finances as well as to create a code of ethics in which they are to abide. The purpose of the Sarbanes-Oxley Act, also known as SOX, is to make top executives responsible for the information that appears on the company’s financial documents. With the implementation of the Sarbanes-Oxley Act executives are required to know what is on financial statements and to
Some can say that the Sarbanes-Oxley Act of 2002 is working while some say that there still ways to get around to committing corporate fraud. Washington wants to crack down on corporate fraud so they came up with the Sarbanes-Oxley Act in 2002 that was designed to protect the interest of investors. “The Sarbanes-Oxley Act established oversight of public corporate governance and financial reporting obligations and redesigned accountability and ethics standards…” (Ferrell, O., Hirt, G., & Ferrell, L., 2009). The act was an important stepping-stone in the right direction especially when responding to the financial scandals of Enron and WorldCom. Those scandals shook customer’s faith and confidence in corporate management of private organizations.
The Sarbanes-Oxley Act, or SOX Act, was enacted on July 30, 2002. Since it was enacted that summer it has changed how the public business handle their accounting and auditing. The federal law was made coming off of a number of large corporations involved in scandals. For example a company like Enron was caught in accounting fraud in late 2001 when the company was using false financial statements. Once Enron was caught that had many lawsuits filed against them and had to file for bankruptcy. It was this scandal that played a big part in producing the Sarbanes-Oxley act in 2002.
The year 2002 marked a critical time for many corporate businesses as it was known for one of the most infamous years in organizational scandal. The Enron debacle, Tyco, Adelphia, and WorldCom all were involved in some sort of corruption. These corporations misfortunate mishaps was the driving force for the implementation of ethical laws. One law in particular was the Sarbanes-Oxley Act (SOX). This law was enacted to help restore integrity and public confidence to the financial markets (Orin, R. 2008). The Sarbanes-Oxley Act is not a law that is new to the scene of corporate America, in fact in 1934 the Securities and Exchange Commission was introduced to help police the U.S. financial markets. As a result,
The act (Sarbanes-Oxley Act) is a law formed to stop corporate scam. Through it, companies are banned from discriminating any staff who lawfully helps in giving information in conduct researches that the workers sensibly considers to be a violation of National Securities Laws (Eaton, 2007). In the case above, it addressed air pollution, emissions and cars. The act would not apply to the two engineers as whistleblowers since the law only protects the corporation’s staffs that feel they are being hit back against by their boss after perceiving an infringement of National Securities Laws. As a result, the two are safe. Their whistleblowing case is unique since they were not working for any Fortune 500 Company. They are simply university researchers.
The internal control practice of separation of duties failed to prevent the fraudulent reporting since various players were committing the scam. The CEO plus the CFO of the Automation Company were both aware of the controller's false revenues. The company had separation of duties meaning that one person was not doing all the financial reporting for the entire finance department. Nevertheless, more than one individual was checking the financial revenue statements reported to the stakeholders. However, no one did anything to stop the fraudulent information from being disclosed. Regardless of the distasteful outcome business ethics was not enforced nor was the consideration of the Sarbanes-Oxley Act.
Cons Even though the advantages of the legislation are clear, there are also disadvantages to consider. The main disadvantage is that it is a costly process. In order to follow the guidelines in the legislation a lot of resources need to be involved, meaning a lot of money goes into simply following the procedure. Government costs also increase to regulate the law Even though the act has very strict rules, there are no rules or guidelines on how to implement the system the act imposes.
The company has an obligation to their clients to protect their information and prevented their employees from committing fraud against their customers. Per Burnoski (2015) “When things are going well, people don’t really think about fraud, and that’s a good opportunity for certain motivated people to commit fraud (Burnoski, 2015).” During the years that the employees and managers were conspiring to boost their sales goals and hit unrealistic quotas should have been a red flag for companies to perform an audit. The CEOs knew when they set the goals that were pushed to the sales team, the goals were extremely hard to obtain. Once they realized several teams across the company were making their sales quota, an investigation should have been launched.
What is code of ethics? A code of ethics outlines fundamental principles. It requirements that can be used to set the basis for things one must and must not do. This paper will explain what a code of ethics is and does for a business, company, or organization, some provisions to the code, and the impact the Sarbanes-Oxley Act has on business America and the code of ethics. Let’s have a closer look at code of ethics.
Fraudulent financial reporting has gained substantial attention from the public after the scandals of many high profile companies in the 21st century. Periodic cases of financial statement fraud raise concerns about the credibility of financial reports and are as a result of problem in the capital markets, a dropping of shareholder value, and, the bankruptcy of the company. Thus, to respond to the public pressure over acts of corporate offense, the Sarbanes-Oxley Act (SOX) was enacted in 2002. SOX proposed major changes to the regulation of corporate governance and financial reporting by improving the accuracy and reliability of company disclosure. This essay will explain the effects of SOX on the financial statement fraud in an organization.
In this paper, I will cover the characteristics of a whistleblower provide an example of one and cover how the Sarbanes-Oxley Act would be used in this particular event.
Marshall, D.J., & Williams, N.J. (2007). Blowing the whistle on accounting fraud: the Sarbanes-oxley whistleblower protections act at a glance. A White Paper for Finance Professionals. Katz, Marshall & Banks LLP. Retrieved on April 22, 2015 from http://www.cfo.com/media/pdf/SOX%20Whistleblower%20White%20Paper_KMB.pd
One of the key provisions of the Sarbanes Oxley Act of 2002 is Title VIII. This is designed to protect whistle blowers, who are reporting illegal activities inside their firms. The basic idea is that this will safeguard these individuals against any kind of retribution from their employers. This will encourage them to become more involved in reporting various discrepancies. Once this occurs, is when the public and regulators will stay informed about a host of events inside the organization.