...Sarbanes-Oxley Act of 2002 Sarbanes-Oxley Act of 2002 U.S. Senator Paul Sarbnes of Maryland and U.S. Representative Michael Oxley of Ohio followed a series of corporate failures, which inacted the SOX Act based on Enron’s bankruptcy and other key organizations such as Worldcom, Tyco, Xerox, and Adelphia who were among the United States organizations executives in the headlines for misdemeanors and multi-billion dollar reassertions," (Dembinski, Lager, Cornford, Bonvin, 2005). The Sarbanes-Oxley Act of 2002, (SOX) was incorporated to strengthen the internal improvements and oversight of corporate control. The primary purpose is to shield and protect shareholders from fradualent activities within the public sector and the stock market. The table below provides a list of a few provisions implemented in SOX Act. Section 302 | Section 401 | Section 404 | Section 409 | Section 802 | Requires that corporate administration confirm that they have assessed the financial reports. | Requires that financial reports include disclosure about any applicable off-balance sheet responsibilities that may exist. | Requires organizations to state whether or not the business's internal mechanism technique are sufficient and operative. | Requires administration to update the public of important budgetary matters when they occur, instead of waiting until the annual or quarterly report. | Imposes penalties for abuses of the SOX rules, which could lead to fines or some jail time. | A description...
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...“Sarbanes-Oxley (SOX) Act and its impact on corporate America” In order to understand why the Sarbanes-Oxley Act came to be, it’s important to acknowledge some of the mistakes made by some companies that led to the creation of this Act. The Sarbanes-Oxley Act was originally enacted in the wake of the Enron scandal, but then pushed to congress after a series of high-profile financial scandals followed Enron, including WorldCom and Tyco that rattled investor confidence and the level of confidence that the public held in corporate America (Rouse). Enron Corporation was one of the largest energy companies in the world, marketing primarily electricity and natural gas but also provided financial risk management for its clients. Enron’s demise began in 1997 when it bought out a partner’s stake in a company (JEDI) and in turn sold that stake to another company (ChewCo) which was created, owned, and operated by Enron (Rouse). This began the multi-layered strategy of transactions that allowed the company to hide debts, report inaccurate accounting errors, making the company appear much stronger and financially sound than it was in reality (Rouse). The Sarbanes-Oxley Act was created in 2002 by Senator Paul Sarbanes and Representative Michael Oxley and signed off by President Busch and introduced and enforced major changes to the regulation of corporate governance and financial practice. The Sarbanes-Oxley Act is arranged into eleven 'titles' (www.soxlaw.com). As far as compliance is...
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...The Sarbanes-Oxley Act: Possible impacts on privately held companies by Justin G. Klimko The Sarbanes- Oxley Act: Possible impacts on privately held companies Most provisions of the Sarbanes- Oxley Act apply only to publicly held reporting companies. Privately held companies doing business with public companies subjected to the act may have certain Sarbanes- based provisions imposed as a matter of contract. Privately held clients should expect that some of these concepts will filter into professional responsibility rules. Certain provisions of Sarbanes – Oxley are directly applicable to privately held companies. Privately held companies doing business with public companies subject to the act may have certain Sarbanes- based provisions imposed as a matter of contract. Attorneys and their privately held clients should expect that some of these concepts will filter into professional responsibility rules. The Sarbanes- Oxley Act has created a positive impact on the ethical culture of large corporations. Changes in corporate governance have made it much more difficult for executives to make decisions that could cause corporate collapse. A full board of directors creates a system that can fully comply with federal financial reporting laws. Even though the privately held companies may be held to have certain Sarbanes- based provisions it’s okay in many ways. In conclusion it does not matter if some privately own business have to comply with the Sarbanes- Oxley Act because...
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...Sarbanes- Oxley Act Impact of Law Max McKay Business Law & Ethics Professor DeLange May 17, 2007 Impact of Sarbanes-Oxley Act Not only were billions of dollars lost in corporate accounting scandals involving Enron and Worldcom, thousands of jobs on top of an immeasurable amount of credibility was also lost in the process. As most everyone knows by now, or should know, 2002 became a turning point in the world of business. Publicly traded companies such as Enron and Worldcom were caught by the SEC misrepresenting financial statements, quickly leading to steep downward spiral in stock prices of publicly traded firms throughout the market. Once considered to be one of the top five accounting firms, Anderson was fined $500,000 and given five years of probation following the Enron scandal. The firm initially lost over 1,000 employees and is no longer audits corporations (CBCNews, 2002). As a result of these scandals, investors lost millions of dollars as the marketplace took a big hit that day nearly five years ago. On June 25, 2002, it was announced that Worldcom was a part of the largest corporate fraud case in American history at the time, with numbers reaching up to $3.8 billion (Snee, 2007). Mr. Snee goes on to say that stocks sunk to new lows on news of the fraud, as investor’s increasingly lost faith in companies’ earnings statements. As a result of such fraudulent activities associated with Worldcom and Enron, President George Bush signed the Sarbanes-Oxley...
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...Introduction to Sarbanes – Oxley Act of 2002 The Sarbanes – Oxley Act of 2002, also known as the Public company accounting reform and Investor Protection Act of 2002 and commonly called SOX or Sarbox is a United States federal law passed in response to a number of major corporate and accounting scandals including those affecting Enron and WorldCom. The Act establishes a new quasi-public authority, the Public Company Accounting oversight Board for overseeing, regulating, inspecting and disciplining accounting firms in their roles as auditors of public companies. The Act covers issues such as auditor independence, corporate governance and enhanced financial disclosure. Major Provision of Sarbanes – Oxley Act of 2002 The Sarbanes Oxley Act of 2002 established corporate accountability and civil and criminal penalties for white – collar crimes. This act is a United States federal law passed in response to a number of major corporate and accounting scandals including those effecting Enron, Tyco and WorldCom. These scandals resulted in a decline of public trust in accounting and reporting practices. This Act provides regulatory bodies and courts to take various actions – civil and criminal proceedings in connection of misstatements amounting to accounting scandals and fraudulent financial reports, other frauds on securities matters, obstruction of justice and retaliating against corporate Whistleblowers. The Act also enforce tougher civil and criminal penalties for fraud and accounting...
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...The Sarbanes-Oxley Act, passed in 2002, is aimed primarily at public accounting firms who participate in audits of corporations. It was passed in response to a number of corporate accounting scandals that occurred between 2000-2002 (Peavler, n.d). This act set new standards for public accounting firms, corporate management, and corporate boards of directors. Sarbanes-Oxley, or SOX, is a federal law that is the most comprehensive reform of business practices since Franklin D. Roosevelt was President of the U.S. and passed the New Deal. What caused the need for the Sarbanes-Oxley Legislation? The Enron scandal was certainly enough to show the American public and its representatives in Congress that new compliance standards for public accounting and auditing had to be put into place. Enron was one of the biggest and, it was thought, one of the most financially sound companies in the U.S. Enron was perhaps the catalyst for the Sarbanes-Oxley legislation. Enron stands for the greatest company scandal in the history of the US economy and has become a symbol of corruption for the whole Western economic system. In 2001, the nation was rocked by the collapse of Enron, a multibillion dollar corporation that employed thousands of people and had affiliations right up to and including The White House itself. Amid the financial chaos and destroyed lives and reputations the collapse left in its wake, questions arose concerning exactly how the catastrophe occurred, why it occurred, and who...
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...The Impact of Sarbanes-Oxley Act of 2002 on Accounting and Finance Departments Danika Grace Brown Lakeland College Kellett School of Business – BlendEd BA 772 Advanced Industrial Accounting II Instructor Mary Diederich March 10, 2015 Table of Contents Abstract 2 Overview of the Sarbanes-Oxley Act of 2002 3 About SOX 4 Reporting and Compliance 5 Risk Assessment and Control 6 Interview at Company X 7 Standards for Corporations and Officers 8 Auditing and Financial Reporting 9 Future Impact of SOX 10 Conclusion 11 References 13 Abstract Sarbanes-Oxley is the response from Congress in regards to the financial industry collapse that happened over a decade ago. Due to unethical reporting from corporations, Sarbanes-Oxley (SOX) is a United States federal law that set new or enhanced standards for all U.S. public company boards, management and public accounting firms. As a result of SOX, top management must individually certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. Furthermore, SOX increased the oversight role of boards of directors and the independence of the outside auditors who review the accuracy of corporate financial statements. This paper will look to provide an oversight of the law and how it pertains to the standards in Accounting and Finance departments nowadays. In addition, this paper will also touch on the ongoing costs and benefits of the now standard...
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...Patrick Chamberlain Dr. Wokukwu Intermediate Accounting October 13, 2011 Corporate Responsibility of Sarbanes Oxley Act of 2002 To first understand the corporate responsibilities of the Sarbanes Oxley Act of 2002, otherwise referred to as SOX; you first need to understand that the Act was created for. The SOX came into effect in July 2002 and it was introduced for major changes to the regulation of corporate governance and financial practice. The act was also known as the ‘Public Company Accounting Reform and investor Protection Act of 2002’ in the senate and was called ‘Corporate and Auditing Accountability and Responsibility Act’ in the house. SOX set new and enhanced standards for all united stated public company boards, management, and public accounting firms. It is named after its sponsors which are Senator Paul Sarbanes ad United States Representative Michael G. Oxley. [6] The bill was enacted as a reaction to a number of major corporate and accounting scandals. The scandals cost the investors billions of dollars because the share prices of affected companies collapsed, shook public confidence in the nation’s securities markets. These scandals do not apply to privately held companies. [6] The SOX act contains 11 titles and sections that range from additional corporate board responsibilities to criminal penalties, and requires the Securities and Exchange Commission to implement the rulings on the requirements to comply with the law. [6] The 26th chairman...
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...4 Impact: Sarbanes Oxley Act has had many positive impacts on American businesses, but has also had its share of criticism. As a result of the implementation of the Sarbanes Oxley Act, firms now produce financial information that is more transparent and holds some form of accountability. One of the greatest benefits of the Sarbanes Oxley Act is that investors are more confident because they now have access to more accurate financial statements and are able to assess the financial strength and stability of publicly traded companies when making investment decisions. American businesses now have stronger corporate governance as companies are more focused on being compliant and honest in their business practices. Sarbanes Oxley has helped to reduce the number of fraudulent financial / accounting activities in publicly traded companies and has also forced companies to have stronger internal controls, which results in more reliable and accurate financial statements. Although Sarbanes Oxley has had a number of positive results on American businesses and investors, several firms resent the act and its impact on their companies. Many executives and managers of such companies complain about the costs associated with being in compliance with the act. These additional costs include time and expenses for external auditors, legal fees, additional employees / compensation fees, fines for non-compliance, etc. They often argue that the cost of compliance exceeds the benefits of the act, which...
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...Sarbanes Oxley Act has had many positive impacts on American businesses, but has also had its share of criticism. As a result of the implementation of the Sarbanes Oxley Act, firms now produce financial information that is more transparent and holds some form of accountability. One of the greatest benefits of the Sarbanes Oxley Act is that investors are more confident because they now have access to more accurate financial statements and are able to assess the financial strength and stability of publicly traded companies when making investment decisions. American businesses now have stronger corporate governance as companies are more focused on being compliant and honest in their business practices. Sarbanes Oxley has helped to reduce the number of fraudulent financial / accounting activities in publicly traded companies and has also forced companies to have stronger internal controls, which results in more reliable and accurate financial statements. Although Sarbanes Oxley has had a number of positive results on American businesses and investors, several firms resent the act and its impact on their companies. Many executives and managers of such companies complain about the costs associated with being in compliance with the act. These additional costs include time and expenses for external auditors, legal fees, additional employees / compensation fees, fines for non-compliance, etc. They often argue that the cost of compliance exceeds the benefits of the act, which is pointless...
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...Sarbanes-Oxley Gabriel Mould ACC561 October 13, 2015 Dr. Janet Forney Sarbanes-Oxley Aspects of the Regulatory Environment In 2001, one of the largest corporate scandals unraveled as Enron/Andersen was accused of corporate fraud. Not long after were companies such as ImClone and Global Crossing were deemed under the same fraudulent activities and congress did very little in correcting the situations. (Larry Bumgardner, 2003) Several committees did hold hearings and a number of bills were introduced to address corporate misconduct. However, the differences between the Senate under Democratic control at the time, and the House of Representatives and White House, under Republican control, on how to address the problems were so great that no legislation appeared imminent. (Larry Bumgardner, 2003) There was a second wave of scandals that involved WorldCom and Adelphia in the summer of 2002. (Larry Bumgardner, 2003) WorldCom had $107 billion in assets but after filing in the Southern District of New York was crushed by their debt of $41 billion. WorldCom’s bankruptcy is the largest in United States history making Enron seem irrelevant. (Beltran, 2002) Three founding members and two other company executives of Adelphia were arrested on charges of looting the nation’s sixth-largest cable-television company on a massive scale. Congress along with the White House began to notice a steady decrease in the stock market which led them to call for action against these scandals...
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...Sarbanes Oxley Companies Abstract Sarbanes oxley act 2002 was passed on July 30, 2002 and only the public companies are now feeling its impact. This act frequently called the “most significant accounting or auditing legislation since the securities exchange Act of 1934”. After the implementation it has established its demands to the companies for proper management and disclosure of risk. Nortel networks is a giant corporate in telecom industry and as it is expected they also have faced the challenges come from the SOX act. Some of them are in favor and some are against the Nortel. ‘SOX’ has manipulated a larger impact on Nortel internal employee and external customers as well as their financial statement. The outcome of the Nortel is clearly different from before implementing the SOX. This paper is to find out the deeper understanding of SOX, how it governs the public corporate, financial disclosure and practice of public accounting in general sense. Besides this it will focus on the outcomes of Nortel network after implementation of SOX and its financial statement. Introduction There have been found a number of corporate financial scandals (e.g. Tyco International) that provides various type of weakness in the governance and auditing practice in the organization. It represents the failures in controlling the reliability and integrity to the stock markets. The scandals cost billions of dollars for the investors when the affected companies were collapsed. As a result, these...
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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 Enron...
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...Sarbanes-Oxley Act of 2002 I. Introduction The Sarbanes–Oxley Act of 2002 (Pub.L. 107-204, 116 Stat. 745, enacted July 30, 2002), also known as the 'Public Company Accounting Reform and Investor Protection Act' (in the Senate) and 'Corporate and Auditing Accountability and Responsibility Act' (in the House) and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002, which set new or enhanced standards for all U.S. public company boards, management and public accounting firms. It is named after sponsors U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH). The bill was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation's securities markets. The Sarbanes-Oxley Act does not apply to privately held companies. The act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. Harvey Pitt, the 26th chairman of the Securities and Exchange Commission (SEC), led the SEC in the adoption of dozens of rules to implement the Sarbanes–Oxley Act. It created a new, quasi-public...
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...Sarbanes-Oxley Act Financial Management Miriacle K. Black Belhaven University Abstract In 2002 an Act by the name of Sarbanes-Oxley was implemented following the bankruptcy of Enron, an American energy, commodities, and Service Company that was based out of Houston, Texas. This paper will discuss and describe the Sarbanes-Oxley Act; also it will answer such questions as: Why was the Sarbanes-Oxley Act enacted? What was the impact of the Sarbanes-Oxley Act? Also, my opinion of whether or not I thing this Act will somehow stop accounting practices. This Act is surely a case of one bad apple spoils a bunch. Sarbanes-Oxley Act The Sarbanes-Oxley Act is a case of one bad apple spoiling a bunch. What is meant by this statement is because of one company’s selfishness and greed; a lot of other companies now have different hoops to jump and straight lines to walk, to keep the same thing from happening again. Not to say outright that the Act is a bad thing because it’s not. When companies go bankrupt that particular company is not the only thing that is affected, these companies have investors and stockholders and they too are affected. This act will allow for such companies and their employers to stay on the straight and narrow. The Sarbanes-Oxley Act was enacted in 2002 following the bankruptcy of Enron, an energy trade company out of Houston, Texas. According to lawyershop.com, Enron kept the fact that they were billions of dollars in debt from its shareholders (Shaw, 2008)...
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