... MGT7019 | Dr. Jennifer Scott | | | Ethics in Business | Case Study: A primer on Sarbanes- Oxley | <Add Learner comments here> ------------------------------------------------- ------------------------------------------------- Faculty Use Only ------------------------------------------------- <Faculty comments here> ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- <Faculty Name> <Grade Earned> <Writing Score> <Date Graded> Case Study: A primer on Sarbanes-Oxley Leona M. Anderson Dr. Jennifer Scott Northcentral University A Primer on Sarbanes-Oxley Introduction The problem to be investigated is whether Sarbanes-Oxley has helped to improve public trust in the markets and reduce non-ethical practices in business. The Sarbanes-Oxley Act of 2002 (SOX) was passed by the 107th Congress on July 30, 2002 (Sarbanes-Oxley, 2002) to provide protection to investors and shareholders as a result of fraudulent activities by some U.S. Corporations such as Enron, Tyco, WorldCom, and Adelphia, as well as other public companies (Jennings, 2012; Scott & Nganje, 2011). SOX introduced major regulatory changes which affect financial practice and corporate governance; and compliance is mandatory for ALL organizations (Guide to Sarbanes-Oxley, 2006). SOX is actually Public Law 107-204 and it is divided into eleven different...
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...Case Study 2 With deciding to go public; LJB Company would be required to follow the Sarbanes-Oxley Act; which stated that all public traded U. S. corporations are required to maintain an adequate system of internal control. As the President of the company it will be both your responsibility of the board of directors to make sure that the internal controls are reliable and effective. You must also hire an independent outside auditor to come in periodically to ensure the adequacy of the company’s internal control system. TO ensure that you will be set up to meet all the internal control requirements by the time LJB goes public, this report will list the requirements of internal control and state what your company is currently doing correct and that can help the company meet the internal control standards. Internal control is defines as all the related methods and measures adopted with an organization to safeguard its assets, enhance the reliability of its accounting records, increase efficiency of operations, and ensure compliance with laws and regulations. It has five primary components, a control environment, risk assessment, control activities, information and communication, and monitoring. These components are broken down further into six principles. These principles are establishment of responsibilities, segregation of duties, documentation procedures, physical controls, independent internal verification and human resource controls. By following the guidelines of these...
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...Abstract This paper identifies issues, activities and practices,in financial reporting by public companies that were sanctioned by the Sarbanes-Oxley legislation Act of 2002 (SOX). This act was passed with the intent to restore public confidence and increase transparency in financial reports of publicly held companies, due to the aftermath of the financial scandals that plagued companies such as Enron and Worldcom (Jennings, 2012). The problem to be investigated is the ethical issues that were legislated by SOX, the cost associated with the implementation of the new act on different stakeholders, and new governance practices required of public companies to insure compliance with the new act. Introduction SOX was implemented in 2002 as “an act to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes” (Jennings, 2012, p.212). This act focused primarily on the independence of auditors who are responsible for auditing public companies, the corporate responsibilities of Chief Executive Officer(CEO) and Chief Financial Officer(CFO), the proper disclosure of financial statements, the conflict of interest between the parties involved, criminal fraud accountability of those involved, and the imposition of the penalty in case of violations. The Public Accounting oversight Board (PAOB) was then created to enforce all the issues identified under the above act (Jennings, 2012). This legislation...
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...Abstract This paper identifies issues, activities and practices, in financial reporting by public companies that were sanctioned by the Sarbanes-Oxley legislation Act of 2002 (SOX). This act was passed with the intent to restore public confidence and increase transparency in financial reports of publicly held companies, due to the aftermath of the financial scandals that plagued companies such as Enron and Worldcom (Jennings, 2012). The problem to be investigated is the ethical issues that were legislated by SOX, the cost associated with the implementation of the new act on different stakeholders, and new governance practices required of public companies to insure compliance with the new act. Introduction SOX was implemented in 2002 as “an act to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes” (Jennings, 2012, p. 212). This act focused primarily on the independence of auditors who are responsible for auditing public companies, the corporate responsibilities of Chief Executive Officer(CEO) and Chief Financial Officer(CFO), the proper disclosure of financial statements, the conflict of interest between the parties involved, criminal fraud accountability of those involved, and the imposition of the penalty in case of violations. The Public Accounting oversight Board (PAOB) was then created to enforce all the issues identified under the above act (Jennings, 2012). This legislation...
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...response to public concerns regarding the accuracy and quality of reported financial information by publicly traded companies, in mid-summer of 2002 Congress passed Public Law 107-204, 116 Stat.745 which is commonly referred to as the Sarbanes Oxley Act (SOX or the Act). The law was passed in large part due to the public outcry of the numerous unethical accounting scandals and fraudulent reports from such notable companies as - Enron, WorldCom, and Global Crossing (Singer and You, 2011). The goal of SOX was to mandate corporate governance reforms in order to help to instill investor’s confidence in capital markets. In an effort to establish best practices and standards SOX created the Public Company Accounting Oversight Board (PCAOB). The PCAOB is chartered with the establishment of independent standards and overseeing the compliance of publicly traded companies with these standards (Agami, 2006). Another very important aspect that the PCAOB is charged with is reviewing the samples of audits conducted by accounting firms and ensuring that both the spirit and letter of the SOX act was established under (Parles, O’Sullivan, & Shannon, 2007). The Sarbanes-Oxley Act is divided into eleven sections referred to as titles. In terms of compliance, many have posited, including Addison-Hewitt Associates (2003), that the most important sections in the body of the Act are titles 302, 401, 404, 409, 802 and 906. The main premise of this paper is to investigate one of the most challenging aspects...
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.................................................................. 4 1.3. Limitations .................................................................................................. 5 1.4 Analysis and conclusion .............................................................................. 5 1.5 Further research ........................................................................................... 6 2. Literature Review: An Overview of Corporate Governance ..................................... 6 2.1 United Kingdom ........................................................................................ 14 2.2 Self-regulation prior to SOX ..................................................................... 18 3. Literature Review: The SOX Act ................................................................ 19 3.1 Enron, the trigger to SOX? ........................................................................ 22 4. The Sarbanes Oxley Act: Radical Reforms in Key Areas ....................................... 26 4.1 Establishing the Public Company Accounting Oversight Board (PCAOB) ......................................................................................................................... 26 1 Student ID: 082168461 4.2...
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...the 2008 Eastern Finance Conference in Florida and the 2008 Midwest Finance Conference in San Antonio, Texas. We would like to thank the discussants of the paper at the above conferences. An earlier version of this paper was discussed at Wilfrid Laurier Finance Workshop in 2007. THE EFFECTS OF THE SARBANES-OXLEY ACT AND CANADIAN EQUIVALENT, BILL 198/CSA RULES, ON CANADAIN CROSS-LISTED STOCKS Abstract Following the Sarbanes-Oxley Act of 2002 (SOX), Canada subsequently implemented similar SOX-type rules on Canadian firms by enacting Ontario Bill 198 and the enforcing several of the Canadian Securities Administrators’ (CSA) rules. This paper tests the impact of the Canadian equivalent, Bill 198/CSA rules, on Canadian firms listed on the Toronto Stock Exchange. First, we examine the effects of SOX on cross-listed Canadian firms and second, we test the impact of Bill 198/CSA rules on Toronto Stock Exchange (TSX) stocks. Using a matched sample approach, the results indicate that after controlling for some relevant cross-sectional factors, SOX had negative...
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...includes all assignments, exams, term papers, and other projects required by the faculty mentor. The known submission of another person’s work represented as that of the Learner’s without properly citing the source of the work will be considered plagiarism and will result in an unsatisfactory grade for the work submitted or for the entire course, and may result in academic dismissal. | | MGT-7019 | Jo Ann Davis | | | Ethics in Business | Assignment 7 – Case Study: A Primer on Sarbanes-Oxley | | | ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- Faculty Use Only ------------------------------------------------- <Faculty comments here> ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- <Faculty Name> <Grade Earned> <Writing Score> <Date Graded> Case Study: A Primer on Sarbanes-Oxley Tanya M. Johnson MGT 7019: Ethics in Business Northcentral University February 3, 2013 Abstract In the wake of...
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...to public concerns regarding the accuracy and quality of reported financial information by publicly traded companies, in mid-summer of 2002 Congress passed Public Law 107-204, 116 Stat.745 which is commonly referred to as the Sarbanes Oxley Act (SOX or the Act). The law was passed in large part due to the public outcry of the numerous unethical accounting scandals and fraudulent reports from such notable companies as - Enron, WorldCom, and Global Crossing (Singer and You, 2011). The goal of SOX was to mandate corporate governance reforms in order to help to instill investor’s confidence in capital markets. In an effort to establish best practices and standards SOX created the Public Company Accounting Oversight Board (PCAOB). The PCAOB is chartered with the establishment of independent standards and overseeing the compliance of publicly traded companies with these standards (Agami, 2006). Another very important aspect that the PCAOB is charged with is reviewing the samples of audits conducted by accounting firms and ensuring that both the spirit and letter of the SOX act was established under (Parles, O’Sullivan, & Shannon, 2007). The Sarbanes-Oxley Act is divided into eleven sections referred to as titles. In terms of compliance, many have posited, including Addison-Hewitt Associates (2003), that the most important sections in the body of the Act are titles 302, 401, 404, 409, 802 and 906. The main premise of this paper is to investigate one of the most challenging aspects...
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...SOX SOX is the Sarbanes Oxley Act that was passed in 2002 due to corporate scandals such as Enron and WorldCom. There has been so much unethical behavior that was occurring at that time. Of course it continues to occur but there have been laws and policies set in place so companies will at least think twice about their behavior before they act in a certain way that could harm them with jail time. It can also damage the firm and have a massive job loss. There are plenty of repercussions for unethical behavior. Colleges who see accreditation by the Association to Advance Collegiate Schools of Business (AACSB) have to incorporate ethics in their program. It should touch ethics topics related to “corporate social responsibility, governance, ethical corporate culture, and ethical decision making.” (Brooks, 180). Section 404 From these issues and problems Section 404 became very important. Under this section it requires management to be more responsible. No longer can the top management say “I didn’t know what was going on”. They can’t throw their hands up and take no responsibility. It requires management to report their findings and that an outside auditor attest management assessment of company’s control. This is to ensure that companies detect fraud in their companies. Hopefully these provisions will cause people to think twice about their actions. 2004 was the first year that companies actually had to comply with SOX that had more than 75 million. (Iliev, 1169) ...
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...according to Sarbanes-Oxley (SOX) as related to ethics and those influenced by decisions from investment management. I assessed the financial and social business practices of different organizations and identified ethical issues within the businesses that impacted internal and external stakeholders. Research revealed issues and activities that should have been resolved voluntarily prior to SOX’s enactment to meet ethical considerations relative to social and financial performance and the organization’s reputation. Recommendations were made based on studies and scholarly articles implicating the best governance practices organizations should adopt to remain compliant with SOX. What is SOX? SOX was established in 2002 as an act to strengthen corporate governance and restore investor confidence. The most important conditional term was to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws and other purposes (Jennings, 2012, p. 212). Provisions under SOX affected organizations’ processes and changed how financial information was released to the public. The act highlights the importance of information system controls by requiring management and auditors to report on the effectiveness of internal controls over the financial reporting component of the organization’s management information systems (Li, Peters, Richardson & Weidenmier Watson, 2012, p. 179). Activities and Issues covered under SOX Many issues and activities...
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...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 of the SOX Act is mentioned above to display the flow and process as it relates to the cycle of compliance within an organization. The areas of emphasis within the SOX Act are Management...
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...International Journal of Smart Home Vol. 3, No. 1, January, 2009 SOX and its effects on IT Security Governance Rosslin John Robles1, Min-kyu Choi1, Sung-Eon Cho2, Yang-seon Lee2, Tai-hoon Kim 1 School of Multimedia, Hannam University, Daejeon, Korea 2 Dept of Information Communication, Sunchon Univerity, Sunchon, Korea 3 Fumate Inc., Daejeon, Korea rosslin_john@yahoo.com, secho@sunchon.ac.kr, yslee@fumate.com, taihoonn@empal.com Abstract The Sarbanes-Oxley (SOX) Act is a United States federal law enacted on July 30, 2002 in response to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. This paper discusses the effects of Sarbanes-Oxley (SOX) Act on corporate information security governance practices. The resultant regulatory intervention forces a company to revisit its internal control structures and asses the nature and scope of its compliance with the law. This paper reviews the implications emerging from the mandatory compliance with Sarbanes-Oxley (SOX) Act. Issues related to IT governance and the general integrity of the enterprise are also identified and discussed. Industry internal control assessment frameworks, such as COSO and COBIT, are reviewed and their usefulness in ensuring compliance evaluated. 1. Introduction Accounting scandals at some of the big corporations like Enron, HealthSouth, Tyco and WorldCom had a devastating impact on investor confidence. Clearly...
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...Disparate Impact of SOX on Large and Small Firms Andrew Rubin St. John’s University I. Introduction During the early 2000’s there was a series of scandals involving many large, multinational firms. Among these firms were Enron, Tyco and WorldCom, all of whom had been costing investors and stakeholders millions, if not billions, of dollars through fraud. Following the scandal, the downturn in investor confidence was enormous. Looking back, there appeared to be a culture of fraud and deceit inside corporate America that had been hurting the average investor. After uncovering these scandals Congress wanted to take immediate action. It passed the Sarbanes – Oxley Act (SOX) shortly after in an attempt restore faith in the country’s capital markets. Between 2000 and 2002 there appeared to be a new, large fraud every few months being covered in the news. Investors were drawing their money out of the markets and some of the largest corporations in America were going bankrupt. Congress quickly looked for answers as to how this could happen and discovered a myriad of factors. Many factors combined to create a culture where small changes to the financials were overlooked and over time those small changes accumulated into larger changes, and bigger issues. Eventually the once small changes became too large to ignore any longer and resulted in collapse. One major factor uncovered by Congress was the effect of auditor conflicts of interest might be having...
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...Sarbanes-Oxley Act: Cost Benefit Analysis The Sarbanes Oxley Act was signed into law by President Bush in 2002. This Act was in direct response to the accounting scandals of the early 2000s. A time that I remember very well, because I’d just graduated from college into the accounting industry, and it was in a total uproar. The Sarbanes Oxley Act (SOX) ordered a number of reforms to enhance corporate responsibility, financial disclosure, and to fight corporate and accounting fraud. This regulation also put financial as well as criminal pressure on the perpetrators, including the auditors. The Sarbanes Oxley Act (SOX) was named after two of its main architects, Senator Paul Sarbanes and Representative Michael Oxley. The SOX Act is composed of eleven titles. They are: Public Company Accounting Oversight Board, Auditor Independence, Corporate Responsibility, Enhanced Financial Disclosures, Analysis Conflicts of Interest, Commission Resources and Authority, Studies and Reports, Corporate and Criminal Fraud Accountability, White Collar Crime Penalty Enhancement, Corporate Tax Returns, and Corporate Fraud Accountability. This Act requires that top management assume responsibility for the financial records that are put out by the corporation. The have to sign off on the information before it is released. This is covered in Section 302. They are certifying that the report does not contain material untrue statements and that the statements provide a fair picture of the financial...
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