...misbehavior and incidents to their immediate supervisor, union representative, or human resources department) or external means (i.e., going outside their organization to, for example, a third party ombudsman, an external hotline, or an applicable government regulatory agency related to the type of wrongdoing behavior. Internal whistleblowing mechanisms for public companies must comply with the provisions of the Sarbanes-Oxley Act of 2002 (SOX). Two of the many corporate governance provisions of SOX place whistleblower-friendly requirements on issuers. SOX section 301 requires the audit committee of every issuer to establish procedures for the receipt, retention, and treatment of complaints regarding accounting, internal control, or auditing matters, and to maintain the anonymity of employee complaints regarding accounting and auditing matters (i.e., the establishment of a whistleblower hotline). SOX section 806 provides protection for employees who blow the whistle against their employer, an anti-retaliation provision subsequently reinforced by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Programs to encourage external whistleblowing typically provide an incentive to the would be whistleblower, either in the form of monetary awards, protection from retaliation, or both. Researchers have identified various issues that are most...
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...Assignment 1 – Whistleblowing and Sarbanes-Oxley Tialia Booth LEG 500 – Law, Ethics, & Corporate Governance Strayer University Professor Lateefah A. Muhammad July 20, 2015 Whistleblowing and Sarbanes-Oxley Peter Buxtun. Linda Almonte. John Kopchinski. Edward Snowden. Everett Stern. J. Kirk McGill. The commonality in each of the individuals listed is that they have been identified as a whistleblower. This paper will review the key characteristics of a whistleblower, examine an example of whistleblowing from recent history, provide an opinion on whether or not such whistleblowing was justified by the individual, and finally review the current Sarbanes-Oxley Act to determine to what extent the individual was protected. A whistleblower can be most basically defined as an individual or persons who report and make known unethical and illegal actions taken by their employer. The employer could be a publicly traded or privately held company or a not-for-profit organization. The whistleblower may choose to release their findings and information uncovered within their own company or to outsiders such as the news media, law enforcement officials, or federal regulators. In every case of a whistleblower coming forward there is a shared desire to stop the unethical and possibly illegal behavior or acts being committed and to ensure those who have been affected are identified and hopefully compensated or righted in some way (Halbert, Ingulli, & Frey, 2015). In 2003...
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...Whistleblowing and Sarbanes-Oxley Tina-Marie Cole Law, Ethics, and Corporate Governance LEG 500 - Lecture Course Prof. Lisa M. Morris January 20, 2015 Whistleblowing and Sarbanes-Oxley Trinity Industries, or TRN (NYSE), manufactures roadway guardrails, which are a highway public safety feature. In 2005, TRN changed its rail head design saving the company two dollars per rail head but failed to notify the Federal Highway Administration which is required by a federal ruling. The newly designed rail heads that TRN has installed on U.S. roads nationally do not propel the guardrails away from crashing vehicles in head on collisions. The lower cost railheads can send the guard rail slicing through a car potentially injuring passengers unlike there predecessors design that pushed the rail away from the wreck and oncoming traffic. The new railheads known as the ET-Plus model failed five crash tests which were also undisclosed to authorities. Joshua Harman, a competitor to TRN discovered the changed design had gone unreported and sued TRN on behalf of the federal government (Davis & Polcyn, 2014). Joshua Harman stands to make one third of a potentially billion dollars in his law suit (Ivory & Kessler, 2014). As a whistleblower, Joshua Harman is saving potential lives and injuries, fighting back at corporate greed and earning a fortune in the process. A whistleblower exposes all forms of alleged misconduct on behalf of an organization which can...
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...Assignment 1: Whistleblowing and Sarbanes-Oxley Act Michelle M. Webb Dr. Boneita Campbell LEG500 Law, Ethics, and Corporate Governance April 20, 2015 . Week 3 Assignment 1: Whistleblowing and Sarbanes-Oxley Act Who are Whistleblowers and what do they do? Could you be a Whistleblower? There are several definitions for the term whistleblower. The most accurate and significant definitions to the subject of this paper are the definition given by the Black’s Law Dictionary and the one by the Whistleblower Protection Act (WPA). The Black’s Law Dictionary defines a whistleblower as a worker who declines to participate in and informs on the unlawful and/or unjust actions of his co-workers or his employer ("The Law Dictionary", n.d.). The WPA defines whistleblowing as the disclosure of facts an employee deems proof of unlawful acts of, blatant misconduct, exploitation of authority, and could jeopardize public safety (Molzen, 2002). Over the years many U.S. workers have observed unlawful transgressions within the workplace and have come forward to report these actions. The actions of these noble citizens (whistleblowers) have been instrumental in saving enormous amounts of money and countless lives over the years. However, these whistleblowers fail to receive the recognition and admirations they deserve for doing the right thing. More often than not they are badgered, bullied, demoted, and terminated from their jobs for their efforts. Therefore, the act of whistleblowing is a decision...
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...Introduction Whistleblowing refers to disclosure of suspected wrongdoing at work by a worker. All workers have the right and the capability to report inappropriate actions such as illegal transactions and operations or neglect of duties among others. The Sarbanes-Oxley due is a policy that sets the standards for the United States public company offices especially the boards, management and public accounting organizations. The paper describes a whistleblower and provides an example of a whistleblower case. The paper also analyzes the whistleblowers actions according to the Sarbanes-Oxley Act. As stated earlier a whistleblower is the individual that tells of an inappropriate action or operation in the organization. Whistleblowers have the following characteristics. Whistleblowers are never interested in changing their behavior or characteristics (Near& Miceli, 1995). Whistleblowers are normally having an educational background and have professional positions in the workplace. The whistleblower is intelligent as such can think through situations clearly and make concise decisions (Near& Miceli, 1985). They are pragmatic and will deal with situations in realistic ways rather than theoretical considerations. They are self-conscious hence not easily carried away by other people’s beliefs and attitudes. Whistleblowers are morally obligated to help others in the best possible manner. They have a high sense of morality (Near& Miceli, 1985). A former Zillow employee Chris Crocker...
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...Whistleblowing And Sarbanes-Oxley Due LEG500 Professor Doris Mitchell Sileen Wright July 20, 2014 What is a whistle-blower? A whistle-blowing can be an employee or an ex-employee of a corporation who have evidence of dishonesty and/or corrupt behavior in the organization or behavior in the organization that is not in the best interest of the public. (Fernando, 365). The characteristics of a whistleblower is a person who is devoted to the concerns of others, they are useful to others, they are not concern in changing their behavior, they allow their on belief and attitudes to guide them and they are very educated people who hold professional positions. While whistle-blowing can be rewarding it can also be harmful for the person who is the whistle-blower and the organization, so one must be very careful in becoming a whistle-blower. For instance, the effects of being a whistle-blower can be strenuous both physical as well as mentally, it can cause the organization as well as the person to lose money and their reputations can be destroy as well, they are chances that someone could be incarcerated, the whistleblower can also be force to leave their job or the can be demoted, the credibility of the whistle-blower as well as the organization can be ruined, and the family of the whistle blower can be put jeopardy. So, when do you think an employee should be a whistle-blower and report misconduct by someone in their company? To some being a whistle-blower is being disloyal...
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...Whistleblowing and Sarbanes-Oxley This document will describe the key characteristics of a whistleblower and briefly summarize on researched instance of Whistleblowing in one publically traded company within the last 12 months. It will include the details of the issue that the whistleblower reported and the effect of the whistleblower’s actions on both herself and the company. Next, it will evaluate whether or not the whistleblower was justified in reporting the company’s actions. Lastly, it will examine the extent to which the whistleblower would be protected under the Sarbanes-Oxley Act. Characteristics For many years, individuals have raised concerns about misconduct, unethical or illegal practices observed at their place of employment to reporters/media, employers’ ethics hotline, management, via labor law posters, or the Office of the Whistleblower. This included employees from private companies, non-profit organizations, and governmental agencies. Employees can report unethical actions regarding public safety, health, business practices, fraud, waste, and abuse. Keep in mind that is does not have to be an employee; it can also be a supplier, contractor, client or any individual who somehow becomes aware of the illegal activities. Despite the fact that unethical behavior occurs within the workplace, there are still several employees that are loyal to the law, the community and society as a whole. These people are known as whistleblowers. Publicly Traded Company One...
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...A Primer on Sarbanes-Oxley The Sarbanes-Oxley Act was declared a law in 2002 (Orin, 2008). The primary purpose of this new law was to convey meaning to restoring faith in corporate America’s financial endeavors (Orin, 2008). The Sarbanes-Oxley Act was meant to aid and protect investors, who suffered extreme losses because of corporations having poor financial performances, which was the case before the law was enacted (Orin, 2008). Distinctively, the Sarbanes-Oxley Act was meant to concentrate on accounting fraudulence by holding corporations accountable for disclosing accurate and reliable financial records. The Sarbanes-Oxley Act was also meant to ensure corporate executive leadership acted ethically throughout daily business (Orin, 2008). Assess the Effectiveness of SOX Legislations Key Ethical Components of the SOX To efficiently and effectively implement the Sarbanes-Oxley Act corporations need to broaden their views and focus on the greater purpose of the Sarbanes-Oxley Act. Beasley and Hermanson (2009) believe to accomplish this corporate leadership need to focus on the following: • Value the purpose of the Sarbanes-Oxley Act. • Comprehend the effect of fraudulence behavior. • Concentrate on ethical attitudes pertaining to rationalizing fraudulence behavior. • Making the Sarbanes Oxley Act the foundation to compliance to improve governance and control. • Investigate and implement enterprise risk management (para 5). Value...
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...Running 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...
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...Adelphia Communications Corporation was a cable company, whose owners, John Rigas and his son Timothy,” were charged with bank fraud, securities fraud, and conspiracy.” (Reference #4) They were charged with all fifteen accounts of securities fraud. Another son of his was acquitted, as well as the former treasurer, Michael Mulcahey. “John and Timothy now face 30 years in prison because of the bank fraud charge.” (Reference #4) “They were charged with hiding over $2.3 billion dollars’ worth of debt in the company,” (Reference #4) as well as stealing from there investors. John became so greedy with the money he was taking, that his son became worried about it and tried to limit him to only taking out one million a month. The prosecution had two witnesses that they used in order to bring down the Rigas’, and they were Adelphia executives, James Brown and Karen Crosniak. They testified and tried to say that they weren’t aware of what they were doing, but ignorance of the law doesn’t mean you can get away with what you do. The effects of what they did have impacted the company so much that they had to move to a new location, and they operate under bankruptcy protection. There are many ethical issues that pertain to this issue, as well as many laws that were broken. First, what some call “creative accounting”, this is when a company tries to do something with their accounting reports to make the company look very profitable so that they can attract new investors. This is...
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...theorld of financial accounting Sarbanes and Oxley or SOX is one of the most important pieces of legislation passed in this decade or even in the history of financial accounting. Sarbanes and Oxley brought about major changes in financial accounting which allows for more regulation of the accounting profession. It took Accounting form being looked at as a numbers game and placed more importance on the communication aspect of the profession. This essay will focus on Sarbanes and Oxley and its impact on the accounting profession as a whole. How can one piece of legislation weigh so heavily on a profession? To answer that question one has to look at the impact Sarbanes and Oxley has had on the practice of public accounting. Prior to Sarbanes and Oxley the regulation of public accounting was done internally, through organizations such as the SEC. However with the passage of Sarbanes and Oxley the profession was given an overhaul making companies more accountable. Sarbanes-Oxley was established to improve the quality and transparency of the financial statements issued by public companies. With that purpose in mind Sarbanes-Oxley developed a new board to oversee how financial statements are audited according to independent standards, the Public Company Accounting Oversight Board. This changed the game. It decreased the chance of companies falsifying financial statements, mainly because of the threat of penalties and imprisonment. In addition Sarbanes and Oxley have had a cascade effect on...
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...Internal control plays a very important role in preventing and detecting fraud, also helps to protect the company’s resources and helps to achieve specific goals or objectives. The company, using internal control in compliance with Sarbanes-Oxley Act and regulations, looks more trustful and stable for investors. Internal control has five elements the company should consider before going public and everyone in the company has responsibility for internal control to some extend. The top managers of the organization set a “tone at the top” by making “clear that the company values integrity and that unethical activity will not be tolerated”1. The top managers review the way the personnel controls the business and how they establish policies and procedures. The top managers also have responsibility “to identify and analyze the various factors that create risk for the business and must determine how to manage these risks” . The risk management includes external and internal risks, analyzes the environment the company works in and predicts any factors that can influence business activities and profitability. It also includes right attitude, competence and monitoring of the risks to achieve stability and timely decisions. The main component of internal control is controlling activities. It helps to complete the internal control with a good communication and information system and periodical monitoring. In general control of activities includes: segregation of duties, establishment...
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...History Initially, accounting information systems were predominantly developed “in-house” as legacy systems. Such solutions were difficult to develop and expensive to maintain. Today, accounting information systems are more commonly sold as prebuilt software packages from vendors such as Microsoft, Sage Group, SAP and Oracle where it is configured and customized to match the organization’s business processes. As the need for connectivity and consolidation between other business systems increased, accounting information systems were merged with larger, more centralized systems known as enterprise resource planning (ERP). Before, with separate applications to manage different business functions, organizations had to develop complex interfaces for the systems to communicate with each other. In ERP, a system such as accounting information system is built as a module integrated into a suite of applications that can include manufacturing, supply chain, human resources. These modules are integrated together and are able to access the same data and execute complex business processes. With the ubiquity of ERP for businesses, the term “accounting information system” has become much less about pure accounting (financial or managerial) and more about tracking processes across all domains of business. [edit]Software architecture of a modern AIS A modern AIS typically follows a multitier architecture separating the presentation to the user, application processing and data management...
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...What exactly is the Sarbanes-Oxley Act? Who does it protect? Who benefits from SOX most? I will discuss what the Sarbanes-Oxley Act (SOX) is its key components, and its primary objective. Also, I will discuss the criticisms surrounding the SOX act. Why it is important to enforce the Sarbanes-Oxley Act. Finally, I will discuss if the SOX has achieved its goals. The main purpose of Sarbanes Oxley Act is to ensure that the corporate sector works with transparency and provides full disclosure of information as and when required (Bing, 2007). This basically means that corporations must keep good records of what goes on in their business, not just for their benefit, but just in case of an audit, then they’ll have all their transactions ready to be reviewed and to keep future corporate scandals down. The Sarbanes-Oxley Act was passed by Congress on July 30, 2002. The law forced public companies to spend much more money having their books thoroughly audited, and it increased the penalties for executives who defrauded investors. Since the bill's passage and implementation, nervous investors who had yanked trillions of dollars from the market have returned (Farrell, 2007). The men behind the Sarbanes-Oxley Act consist of U.S. Treasury Secretary Henry Paulson, New York Stock Exchange CEO John Thain and former AIG chief Maurice "Hank" Greenberg. Even though their voices my appear to be isolated, Charles Niemeier a member of the Public Company Accounting Oversight Board...
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...Effect of Unethical Behavior Article Analysis Lindsey Davison August 26, 2013 Acc/291 Jonathan Gillen Effects on Financial Statements When the Sarbanes-Oxley Act was implemented in 2002, it impacted a lot of publically traded companies. There were many companies that were using unethical practices to boost their numbers and give the top dogs of the company’s loads of money. Companies like Enron, Tyco, and WorldCom were companies that most of us heard about getting hit the hardest once the act was put into place. The Sarbanes-Oxley Act created a Public Accounting Oversight Board to ensure that financial statements are audited according to specific standards. This makes it to where those who are in top financial positions such as Financial Executives and Chief’s are held directly responsible for what is being reported to the SEC. With that being said, the Act also makes it to where the audits aren’t in complete control of those in top positions, so they can’t audit their own work basically, which is exactly how the above mentioned corporations got away with it for so long. There have been both positive and negative effects of the Act; positive effects are that investors are more confident in making solid investments (Fass, 2003). Some negative effects are that companies are spending a lot of time, money and concentration on updating their software to be up to par on the new standards, like the Section 404 certification (Fass, 2003). Those are just minimal if you...
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