Sarbanes-Oxley Act Essay

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. Also, SOX increased the oversight role of boards of directors and the independence of the outside auditors who review the accuracy of corporate financial statements.[1]

The Sarbanes-Oxley Act (SOX) was passed by Congress in 2002, and is administered by the SEC. The SEC checks for compliance and creates rules and requirements. The Act was created to restore investor confidence in financial statements after major accounting frauds, such as Enron, Tyco, and WorldCom. In addition, SOX aimed to prevent future accounting fraud through improving the accuracy of disclosures and through increasing corporate governance, accountability, and reliability.

The Sarbanes-Oxley Act, is an act passed by U.S. Congress on July 30, 2002. The primary reason was to protect investors from the possibility of fraudulent accounting activities by corporations. The act is commonly known as SOX Act. The act is named after its cosponsors, U.S. Senator Paul Sarbanes and U.S. Representative Michael G. Oxley. It mandates strict reforms to improve financial disclosures from corporations and prevent accounting fraud. The Sarbanes Oxley Act is arranged into eleven titles. They are Public Company Accounting Oversight Board (PCAOB), Auditor Independence, Corporate Responsibility, Enhanced Financial Disclosures, Analyst Conflicts of Interest, Commission Resources and Authority, White Collar Crime Penalty Enhancement, Corporate Tax Returns, and Corporate Fraud Accountability. These titles provide the description of specific requirements and mandates for the financial reporting. The SOX Act monitors compliance through various sections. However, the most significant sections are 302 (Disclosure controls), 401 (Disclosures in periodic reports), 404 (Assessment of internal control), 802 (Criminal penalties for influencing US Agency investigation/proper administration). As a result of SOX Act, the top management must individually certify the accuracy of financial information. The Act increased the oversight role of board of directors and the independence of the outside

Investors in publically trading companies should be protected from fraud, corruption and the intentional misleading by corporate executives concerning corporate finances. The Sarbanes-Oxley Act was passed on July 30, 2002 for the purpose of protecting investors from the risk of deceitful accounting practices by corporations. This paper discusses the background of the Sarbanes-Oxley Act of 2002 to include the when and why; as well as the intentions and purposes, and the process. It further addresses the arguments for and advantages of the law and the disadvantages. Lastly, this paper will speak to the impact of Sarbanes-Oxley in 2017 and beyond; containing the lawsuits, SOX for Not for profits and foreign countries.

The Sarbanes-Oxley Act was passed in 2002 as a response to a wave of corporate accounting scandals that damaged public trust in the controls of the US financial system. SOX therefore was created in order to create the framework for better control over accounting information and better accountability among members of senior management. Damianides (2006) notes that much of the burden of providing these tighter controls has fallen to IT departments. The Act not only sets out prescriptions for tighter internal controls, but effectively mandates that senior IT managers will need to communicate those controls to their CFO and CEO, as well as to external auditors.

There are various sections of SOX that deal with the criminal penalties that have to be undertaken based on certain misconducts as well as the need for the Securities and Exchange Commission to come up with necessary regulations. These are meant to define and determine the manner in which public corporations have to comply with the relevant laws that underline the course of their operations. . A number of major accounting and corporate malpractices had been reported to have been perpetuated by the management teams of WorldCom, Enron as well as Global Intersection. In this context, there is going to be a comparison and a contrast of the views of accountants and management in scope of SOX in internal regulation. In addition, there is going to be an analysis the manner in which the changes facilitated by the Act have affected accounting firms,

The SOX Act crafted new standards for corporate accountability. The act also created new penalties for wrongdoing and fraudulent practices. These penalties included fines and time in federal prison. This law changed the way corporate boards and executives interact with each other and with corporate auditors. It removed the all-to-common defense of "I wasn't aware of financial issues" from CEOs and CFOs, holding them accountable for the accuracy of the company’s financial statements. In addition to the executives, the auditors who did the reports were also liable for the contents of the reports, and could be fined and jailed as well. This did away with another all-to-common defense of “I wasn’t aware of false reporting by the company.” The Act specifies new financial reporting responsibilities, including adherence to new internal controls and procedures designed to ensure the validity of their financial records. That is to say, checks and balances were put in to place so that a company’s accounting firm that produced financial statements could not also be an independent auditing firm for the same company. While this makes common sense, it was not a law, and a few

This paper provides an in-depth evaluation of Sarbanes-Oxley Act, which is said to be promoted to produce change in the corporate environment, in general, by stressing issues of public accountability and disclosure in the financial operations of business. It explains how this is an Act that represents the government 's and the Security and Exchange Commission 's concern in promoting ethical standards in terms of financial disclosure in the corporate environment.

As a response to several corporate failures resulting from corporate misconduct and fraud, Congress passed the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act is an accounting and business related law that was put into place to help boost confidence in financial accounting and financial markets (US Sarbanes Oxley Act). Some of its key provisions are that it requires the CEO and CFO to personally sign off on all financial statements, increases penalties for those who violate the act, and it protects whistleblowers (SOX 2002). Clearly, Sarbanes-Oxley can improve ethics in financial reporting and the purpose of this paper is to show how.

The Sarbanes-Oxley Act of 2002, also known as the SOX Act, is enacted on July 30, 2002 by Congress as a result of some major accounting frauds such as Enron and WorldCom. The main objective of this act is to recover the investors’ trust in the stock market, and to prevent and detect corporate accounting fraud. I will discuss the background of Sarbanes-Oxley Act, and why it became necessary in the first section of this paper. The second section will be the act’s regulations for the management, external auditors, and companies, mainly publicly-traded companies, and the cost and benefits of the act. The last section will be the discussion of the quality of financial reporting since SOX and the effectiveness of SOX provisions to prevent

The Sarbanes-Oxley Act of 2002, also known as the SOX Act, is enacted on July 30, 2002 by Congress as a result of some major accounting frauds such as Enron and WorldCom. The main objective of this act is to recover the investors’ trust in the stock market, and to prevent and detect corporate accounting fraud. I will discuss the background of Sarbanes-Oxley Act, and why it became necessary in the first section of this paper. The second section will be the act’s regulations for the management, external auditors, and companies, mainly publicly-traded companies, and the cost and benefits of the act. The last section will be the discussion of the quality of financial reporting since SOX and the effectiveness of SOX provisions to prevent another financial statements fraud, such as Enron and WorldCom from occurring in the future.

The Sarbanes-Oxley (SOX) Act of 2002 was signed into federal law on July 30, 2002. The stated purpose of the law is "to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the security laws, and for other purposes." The law has influenced long term changes in the way publicly traded companies manage auditors, financial reporting, executive responsibility and internal controls. SOX is considered the most substantial piece of corporate regulation since the securities laws of the 1930's (Stults, 2004).

The Sarbanes-Oxley (SOX) act was passed into law in 2002. It was created in response to major financial scandals that largely shook the public's confidence in corporate accounting practices. It was a significant response to improper record handling techniques. Under the law, corporate managers must assess whether they have sufficient safeguards to catch fraud and bookkeeping errors. There are consequences for not complying with the provisions of the act and there are certainly advocates and opponents of it. Price Waterhouse Coopers says "Without a doubt, the Sarbanes-Oxley Act is the single most important piece of legislation affecting corporate governance, financial disclosure and the practice of public

This legislation requires “help curb financial abuses at companies that issue their stock to the public. SOX requires that these public companies apply both accounting oversight and stringent internal controls. The desired results include more transparency, accountability, and truthfulness in reporting transactions”. (Wild, 2015, pg. 12).

After the accounting scandals that took place in 2001 and 2002, Congress passed the SOX which requires companies to be held more accountable for financial statement reporting. SOX was established as a corporate responsibility law, which applies to all companies who are registered with the SEC (Mundy & Owen, 2013, p. 183). Mundy and Owen explains that SOX’s intention is to enhance the quality of financial statement reporting among all companies, to help investors feel confident with their investments (p. 183). Additionally, Mundy and Owen note that SOX looks to increase the reliability and accuracy of financial statements by implementing regulations and requirements on internal controls over financial reporting (p.183).