Acct 200 CRN #
Group Research Project
Sarbanes Oxley
David, Eric, Jeff

We have decided to analyze and research the managerial accounting theory of the Sarbanes Oxley Act. In this project we will describe how this act became in existence, the implementation of this act into major corporations, the organization problem that the act was developed to address, the specific pros and cons of this act, how companies have adjusted accounting process because of this act, and our position on the act. In analyzing and researching these different topics we will better understand the complexity and the specific foundations of the Sarbanes Oxley Act. As stated above we will first look at how the Sarbanes Oxley Act became in existence. The Sarbanes Oxley Act was passed into legislation in 2002 because of a series of corporate scandals. Some regard the Sarbanes Oxley Act as the most significant modification of securities regulation since the 1930’s. However, in the 1990’s, there were a number of amendments that significantly enlarged the regulatory powers of the Securities Exchange Commission. These acts were significant that led up to the implementation of the Sarbanes Oxley Act of 2002. These regulations include the Penny Stock Reform Act of 1990, the Securities Acts Amendments of 1990, the Market Reform Act of 1990, and the National Securities Markets Improvement Act of 1996. All of these acts have helped shape and form the original Sarbanes Oxley Act of 2002. For years since the original regulations regarding to the Securities Exchange Commission in the 1930’s congress have been attempting to streamline the regulatory process generally. The goal is to make the process more efficient and more relevant to today’s online environment. Another goal is to create more oversight over securities transactions and accounting practices. Additionally, as the number and types of online securities frauds increase, the securities exchange commission is trying to keep pace by expanding its online fraud division (Miller and Jentz 566--568). We have looked at specific regulations that have helped form and create the Sarbanes Oxley Act of 2002, we will now explore why the act became in existence. Accountants, attorneys, physicians and other professionals have found themselves increasingly subject to liability in the past decade or so. This more extensive liability has resulted in large part from a greater public awareness of the fact that professional are required to deliver competent services and are obligated to adhere to standards of performance commonly accepted within their professions. The devastating destruction of major corporations in the early 2000’s called attention to the importance of abiding by professional accounting standards. In 2002 a major public accounting firm, Arthur Andersen LLP, was indicted on criminal charges for its role in thwarting the government’s investigation into Enron’s accounting practices. As a result, that company, Arthur Andersen LLP, will most likely never recover. Moreover, under the Sarbanes Oxley Act of 2002 was passed by Congress in response to events mentioned previously. Public accounting firms throughout the nation will feel the effects for years to come because of the regulations included in the Sarbanes Oxley Act. Among many other regulations, the act imposes stricter regulation and oversight on the public accounting industry. Taking into consideration the many potential sources of legal liability that may be imposed on them, accountants, attorneys and other professionals should be well aware of their legal obligations in order to prevent such liabilities. The Sarbanes Oxley Act defines the term issuer as a company that has securities that are registered under Section 12 of the Securities Exchange Act of 1934, the is required to file reports under Section 15(d) of the 1934 act, or that files – or has filed – a registration statement that has not yet become effective under the Securities Act of 1933 (Miller and Jentz 580-582). So far we have discussed the various regulations leading up to the Sarbanes Oxley Act. We have then discussed the increasing legal liability in the past years that has lead up to the creation of the Sarbanes Oxley Act. We will now examine the person, group or organization that originally proposed the theory and the historical context in which the theory arose. As mentioned previously the Sarbanes Oxley Act was put into legislation in 2002, specifically on August 29th 2002. The act was formed by two political officials, Paul Sarbanes and Michael G. Oxley. Paul Sarbanes was born on February 3, 1933. He is a Democrat and a representative for the state of Maryland in the US Senate for thirty years. In 2002, Sarbanes was the Senate sponsor of the Sarbanes-Oxley Act of 2002. Sarbanes was the longest-serving senator in Maryland history; he served from 1977 until 2007. He did not seek re-election in 2006. The sponsor from the House of Representatives was Michael Oxley, a Republican from Ohio. Michael G. Oxley was born on February 11, 1944. He is a Republican representing the 4th congressional district of Ohio in the U.S. House of Representatives. Oxley served as the chairman of the Committee on Financial Services and was House sponsor of the Sarbanes-Oxley Act of 2002. In 2005, Oxley announced his retirement from Congress, effective at the end of his term in 2007. Both Sarbanes and Oxley had quite prestigious careers in political office. Other notables include but not limited to Sarbanes being selected in August 1974 by the House Watergate Committee to introduce the first Article of Impeachment against President Richard Nixon. Later in 1976 Sarbanes was elected to the United States Senate. Oxley worked for the Federal Bureau of Investigation from 1969 to 1972 and became active in the Ohio Republican Party. Oxley served in the Ohio House of Representatives from 1972 to 1981. Both Sarbanes and Oxley have made a name for themselves that will be engraved in the history books of business and accounting for many years to come (Institue 1). We will now move on to talk more depth about the specific reasons behind the Sarbanes Oxley Act.

Institue, The Data Governance. SOX-online: The Vendor-Neutral Sarbanes-Oxley Site. 2003-2006. 14 02 2011 <http://www.sox-online.com/sarbanes_and_oxley.html>.
Miller, Roger L and Gaylord A Jentz. Fundamentals of Business Law. Mason: West Legal Studies in Business, 2005.