...head: THE SARBANES-OXLEY ACT: A REVIEW OF THE LITERATURE 1 The Sarbanes-Oxley Act Matthew Gurniak University of Maryland University College Author Note This paper was prepared for AMBA 630, Section 9046, taught by Professor Wylie. Introduction American investors lost confidence in the American market, as a result of several large companies falsifying financial statements. In response to this matter, Congress passed the Sarbanes-Oxley Act (SOX) in the year of 2002 (Rehbein, 2010, p.90). Though there are many benefits that have come out of SOX, many argue that there are several issues that should be addressed. As a team we will discuss the main advantages and disadvantages of the act, the effect the act has had on CEO’s and CFO’s of publicly held companies, how the act has affected the function of internal controls within organizations, and what changes should be made to act. What Are the Main Advantages and Disadvantages of SOX? The Sarbanes-Oxley Act (SOX) has many advantages. There are repeated ethical scandals in business and the majority of the time “ethics and the law run parallel” to each other (Livingstone, 2009, P. 4). The SOX is the first step in holding companies accountable and is a model for accounting practice reform. The SOX controls auditors’ independence and responsibility by fighting business fraud and improving corporate governance. Tsui (2009) stated that “the SOX increases personal liabilities of senior management and introduces...
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...Sarbanes-Oxley The Sarbanes-Oxley act of 2002 is a law passed to control financial scandals such as Enron and WorldCom, and restore investor confidence. Sarbanes-Oxley, or SOX as many people call it, was considered a significant change to federal securities law, but at the time, the costs were unknown. Today after nine years, companies have realized that the costs of this act are not be stopping the fraud as originally expected, and it is having some unintended consequences to the securities industry. The most important, and possibly the most costly parts of this act are corporate responsibility, increased internal controls, new auditing requirements, privatization of businesses, and the reaction to this act by foreign entities. Title I & II– Public Company Accounting Oversight Board and Auditor Independence The act established the Public Company Accounting Oversight Board (PCAOB), which was placed in charge of developing and enforcing professional standards, ethics, and competence of accounting professionals providing services to publicly traded companies. The PCAOB recently announced its budget for 2011 would be $204.4 million to perform these duties (Financial News, 2010). One of their guidelines is that public accounting firms that provide audit services to public companies can no longer provide any bookkeeping, consulting, actuarial, or investment services that may interfere with their objective findings in an audit, and to guarantee auditor independence the act provides...
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...Sarbanes-Oxley Act (SOX) of 2002 Topics Covered: How SOX affects the following: CEO’s and CFO’s of Public Companies Outside Independent Audit Firms SOX section 404 on Internal Control The Main Advantages and Disadvantages of SOX Executive Summary The Sarbanes-Oxley Act of 2002 (SOX) was intended to create more transparency in financial reporting and to combat the perceived inflation of CEO compensation. To do this, the act required that a board of directors be financially independent from the CEO and have no familial ties. It also required the CEO and CFO to personally sign all quarterly and annual reports submitted to the SEC and provided for criminal penalties if this was not done. Our research indicates that Sarbanes-Oxley has created more transparency in the system, but it has actually had the opposite effect than was intended with regards to CEO compensation. The research indicates that CEO compensation has increased for many companies post-Sarbanes-Oxley. Due in large part to the Enron scandal, SOX needed to address outside independent audit firms to improve the accuracy of financial reports disclosed by publicly traded companies. These financial reports are used by investors, bankers and interested consumers to determine how well an organization is doing and provide investors with vital information about a company’s performance. This paper will discuss the Sarbanes-Oxley Act and how the SOX law affects outside independent audit firms. Next we review...
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...Donahue 1 Jaime Donahue Professor Phillip Miller Principals of Management 12th, December 2012 Sarbanes-Oxley Act’s Impact on Corporate Business Business scandals, Ponzi schemes and fraud are something we have all heard of. Over the years there have been many accounting scams from companies all over the world. We all remember one of the most publicized cases of fraud, Enron. For many years there has been fraudulent activity in many companies. Sarbanes-Oxley was established to prevent these types of scandals. Some believe it is not as valuable as once predicted, but is anything 100% preventable? Prior to Sarbanes-Oxley Act, the Securities and Exchange Commission was in place since 1934. It was established to police U.S. financial markets. However after years of failure and proof that the Securities and Exchange Commission’s wasn’t enough, the Sarbanes-Oxley Act was born. In 2002 Sarbanes-Oxley Act was created by Senator Paul Sarbanes and Representative Michael Oxley. Several large company failures not only sparked the public on fraud activity, but also these two gentlemen who decided to put into place something that would enforce financial honesty in businesses. There are several layers to the Sarbanes-Oxley Act. ,For example section 404 requires companies to have internal control report with their annual audits. This section of Sarbanes-Oxley also puts accountability and personal liability on the accounting teams of the companies. The infamous...
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...Better Solutions to Information Overload Substantial information overload is present in every organization. I can recall specifically working in the Marketing/IT department for a small computer outsourcing firm several years ago in Omaha, Nebraska. The company’s business model was to show potential clients that outsourcing their finance, IT and HR department’s data systems with their firm could save them tremendously short and long term. The company invested millions of dollars into state-of-the-art data storage facilities that housed numerous amounts of data. These storage facilities could withstand everything mother nature could through at it. In 1998, this was a great business model, considering the millennium bug or Y2K problem was the hot IT issue. At the same time, I thought it was a strike contrast that a small, up and coming IT company would neglect internal issues that would impede their employees from making the company competitive. The company decided to implement an internal website or intranet as the focal point for retrieving data. The company’s intranet had an abundance of information that was injected with data from a barrage of sources. According to a 2009 report by Watson Wyatt, “only 50% of employees accessed the intranet on a daily basis; 80% said their company’s system needed improvement; and 50% said searching on their intranet was too difficult” (Nasiri, 2009). Based on my past experiences, I think organizations are likely to find better solutions...
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...Introduction Benefits are incentives used to attract and retain quality employees. Benefits can range from short-term to boost production and employee moral to long-term to make employees want to stay and be loyal to the company. There are benefits that are required by law and those that common in most work places but surprisingly not required by labor laws but are used to attract and retain employees as well as keeping the organization competitive in the job market. There are different types of benefits ranging from fringe to ones only designated to special groups. We will explore these different types and who is entitled to them. Federally Mandated Benefits Almost all employers are legally required to provide certain benefits for employees. These include Medicare, Social Security, Workers Compensation and Federal and State Unemployment Insurance. Companies with 50 or more employees must also provide workers with unpaid family and medical leave benefit under the Family and Medical Leave act or FMLA. Worker Compensation The Office of Workers' Compensation Programs administers four major disability compensation programs which provide wage replacement benefits, medical treatment, vocational rehabilitation and other benefits to certain workers or their dependents who experience work-related injury or occupational disease. The of the divisions is the Division of Federal Employee's Compensation in which the Federal Employees' Compensation Act provides workers' compensation...
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...technology driven world. However, after taken this course, it is quite clear to me that gathering the beneficial information is not an easy task as it seems before. There are crucial elements to obtain valuable information for the businesses. Every business is unique so the strategies for them too. To illustrate, the desired strategy of the business can be thought as an apple pie. To make an apple pie, first, we need to have flour which is the main ingredient. Thus, data is our main ingredient. However, Databases are like huge swimming pools. There are many data sources that we can collect data but having all the data cannot make a good apple pie which is desired at the end. Similarly, no matter how many ounces we have the flour, it is not possible to prepare an apple pie with having only flour. In this step, knowledge which is ‘know how to make a pie’, takes place. Every business is unique. Therefore, as future managers, we need to know which direction we should choose to pursue our business goals. There are many types of bakery in the world cuisine, but as it is stated before, we only desire to make an apple apple which includes certain amount of knowledge that involves specific ingredients namely as apples, sugar and butter. After having all the elements, the mixture is needed to be cooked in the information technology oven. When the cooking is over, we can enjoy the apple pie stands for the applicable information for the...
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...Senator Paul Sarbanes and Congressman Michael Oxley. The purpose for drafting and passing the Sarbanes-Oxley legislation was to protect investors by improving the accuracy and reliability of corporate disclosures in accordance with existing securities laws, and to encourage and enable corporate executives to be more ethical and socially responsible when conducting business (Bawa, 2004). In other words, the Act’s measures were to strengthen the reporting requirements that already existed for publicly traded companies, by holding those in power in the corporate world accountable for their actions. The Act increases penalties for executives who do misdeeds and imposes internal governance rules on their companies (Bawa, 2004). How does the Act hold executives accountable? The legislation requires the most senior company executives (CEO’s, CFO’s, etc.) to certify the company’s financial statements each time those reports are filed with the Security and Exchange Commission (Brigham & Ehrhardt, 2014 p 70). The impetus for passing Sarbanes-Oxley was due to the numerous corporate scandals that had come to plague the corporate world in the United States prior to the turn of the millennium. A common theme of these corporate scandals was the manipulation of company financial reports to hide certain accounting transactions from the public, often resulting in inflated financial statements. Some of the most well-known companies who misrepresented the questionable transactions were WorldCom, Enron...
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...the CFO A study of what makes a chief financial officer 2010 Our thanks to nearly 700 CFOs who participated in the study and, in particular, to those who shared their insights and personal experience of the role in a series of interviews: Giacomo Baizini CFO, Evraz Ben Noteboom CEO, Randstad Srikanth Balachander CFO, Bharti Airtel Caroline Raggett Managing Director, London financial officers’ practice, Russell Reynolds Associates Evelyn Bourke CFO, Friends Provident Stephen Carver Media and crisis management expert, Cranfield School of Management Ian Dyson (formerly) CFO, Marks & Spencer Luigi Ferraris CFO, Enel Andy Halford CFO, Vodafone Simon Henry CFO, Royal Dutch Shell René Hooft Graafland CFO, Heineken Juha Laaksonen CFO, Fortum Patrick Regan CFO, Aviva Simon Ridley FD, Standard Bank Hans-Peter Ring CFO, EADS Sue Round Head of Investments, Ecclesiastical Robin J Stalker CFO, Adidas Firoz Tarapore CFO, Dubai Aerospace Enterprise Tim Tookey CFO, Lloyds Banking Group Rob Murray CFO, Coca-Cola Hellenic B Document title Additional text In this report Executive summary 2 Contributing to strategy 4 A broader business role 6 Core competencies remain key Future focus on stakeholder communication 10 12 and 18 The CFO’s contribution 14 Staging post or career destination? 20 A toolkit for the aspiring CFO 22 Demographics 26 What makes a CFO 28 Ernst & Young...
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...earnings. The below takes a look at possible opportunities that Summit has to improve their balance sheet, this would ensure that they are within the guidelines of their covenants. 1. If you were Kathy Hutton, what would you do? Due to the fragile nature of Summit Distributors business, we would agree with Dave Flander’s suggestion of going from LIFO to FIFO. There are a few negatives and positives with this decision. First, violating any of the loan covenants would alert the bank, and any future dealing with them would incur a 50 basis point increase on the lending rate (.50%). Also because of the switch older equipment would sit in storage for a longer period of time, thus forcing Summit to eventually sell it at a discount or depreciate it towards the base value only to have it collect dust. The reason for this is that the nature of the industry requires for our firm to have a variety of warehouses located in different locations with the newest equipment, in order to be competitive in the market. Due to the economic decline, fewer of our products will be purchased from us, and we can assume that no one would want to buy an older piece of equipment with such a fragmented industry offering many substitute options. So what Kathy Hutton should do is the following and some positive benefits: a. Switch over to a...
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...HISTORY: JP Morgan Chase & Co is one of the oldest, largest and best known financial institutions in the world. It is a result of a combination of several large US banking companies and over 1200 predecessors. It dates back to 1799. Chase bank is a subsidiary of JpMorgan Chase & Co that specializes in?. The Chase brand is used for credit card services in the United States and Canada, the bank's retail banking activities in the United States, and commercial banking. It is a national bank that constitutes the consumer and commercial banking subsidiary of financial services firm JPMorgan Chase. The history of Chase Bank dates back to September 1st, 1799 when the Manhattan Company was founded by Aaron Burr as a water carrier company. Burr’s goal was to bring clean water to New York City and put a stop to the monopoly that the Bank of New York and the federal bank had on the state. Alexander Hamilton started Bank of New York in 1784. The Mannhattan Company received its charter in an unusual way, through Burrs’ political connections in New York. Being a former congress man and vice president as well as other prominent positions, he sponsored abill through the New York assembly that established the water company which in turn allowed the creation of a bank. A clause in the bill allowed the company to invest surplus capital in any lawful enterprise. The Bank of Mannhattan started paying dividends in June 1800. The water carrier/bank was off and running. In 1804 Burr was...
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...the setting & environment leading up to, during, and post-merger, then identify the stakeholders involved, and analyze the case context. In addition, Adler & Gundersen (2008) applications, along with options, decision factors and recommendations will be addressed. Setting and Environment In early 2005, two leading firms, DLA and Piper Rudnick, merged in the largest ever in the legal market. DLA, based in the UK, and Piper Rudnick, based in the USA, came together in order to establish a global platform and a foundation for accelerating growth. The two firms, along with US West Coast firm Cray Cary Ware and Freidenrich, became the merged DLA Piper. Initially, the firm would be led by three joint CEO’s who would have to address the issues that would make it a leading business global law firm. In order to achieve its strategic goal, the leadership of the new firm recognized that it must become aligned across its strategy, people, systems, structure, culture, and management. To achieve its express goal of becoming a global business law firm, several areas would need to be addressed and initiatives would need to be created and executed. For example, creating a clear vision would be paramount, along with identifying core values. These would have to be communicated and reinforced from local initiatives to global events, laying the foundation for acceptance and integration. There would also need to be...
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...ensure that the corporate sector works with transparency and provides full disclosure of information as and when required. The transparency purpose of Sarbanes Oxley Act is fulfilled by ensuring real time disclosure of information, the adherence to guidelines of the Generally Accepted Accounting practices, full financial details being made available of all the transactions not mentioned in balance sheet. This purpose of Sarbanes Oxley Act is also fulfilled by an expanded disclosure of financial and non financial control measures in force in every company. Similarly, public certification of these internal controls and financial measures also helps fulfilled the purpose of Sarbanes Oxley Act (Bing). The objective of Sarbanes Oxley Act is to make company audit committees, the auditing...
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...Chp 1 Questions: (pg 23-4) 1. a. What are some of the industries in the healthcare sector? Healthcare services (ex. hospitals), Health insurance (makes most of the payments to the health service providers), Medical equipment and supplies (maker of medical/diagnostic equipment), Pharmaceuticals and biotechnology (develop/market drugs/therapeutics), and "other" (which includes consulting, educational, government, and research agencies) b. What is meant by the term healthcare finance as used in this book? Healthcare Finance consists of both the accounting (which creates and provides useful operations and financial status information to interested internal and external parties for assessing financial and operation performance) and financial management (provides the theory, concepts, and tools necessary to help managers make better financial decisions) for the healthcare sector of the economy. c. What are the two broad areas of healthcare finance? Accounting and financial management (aka Corporate Finance) d. Why is it necessary to have a book on healthcare finance as opposed to a generic finance book? Healthcare services are dominated by both private and governmental not-for-profit corporations, which differ from investor-owned businesses (learned in a generic finance book) due to the majority of payments being made are from third-party payers (e.g., employers, commercial insurance companies, government programs). 2. What is the difference between...
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...recent VP-of-HR Newsletters we have taken a look at defining what is strategic HR and looked at several examples of strategic versus tactical actions. At this point, it is important to step back and take a much broader look because a common mistake that many in HR make is to focus exclusively on the strategic elements of HR. Human Resources, like all other business functions, must do a range of things well from basic transactions to strategic planning in order to be successful. The goal of this article is to focus on more clearly defining the role and the purpose of the HR department, identifying who is the customer, and communicate the importance of taking responsibility for all people management results. UNDERSTANDING THE ROLE OF HR WITH THE “FIVE LEVELS OF HR CONTRIBUTION“ MODEL There are numerous “models” that outline the different focus areas found in the average HR department. Without a doubt, the most famous one is the “four quadrant” or “business partner” model developed by Dave Ulrich at the University of Michigan. As effective as that model is, it fails to define the role of strategic planning. As an alternative to the four quadrant model, I offer the “Five Levels of HR Contribution” model that I believe better describes both the basic and the strategic levels of HR contribution. HR “work” can be classified into five distinct levels from the basic to the most strategic. Those levels include: [pic] Level One –Information Management and Basic Transactions Every HR department...
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