October 12, 2007
Assignment #5, SOX
The Sarbanes-Oxley Act of 2002 was signed into federal law in July 2002. It is commonly knows as SOX and was a result of the majoring accounting and corporate scandals, including Enron and WorldCom. Essentially, this act puts new and tighter accounting restrictions and standards on public firms and their accounting practices. SOX also established the Public Company Accounting Oversight Board which oversees and regulates accounting firms. In summary, this act further regulates the public companies management and accounting practices. Enron:
Enron Corporation was known as one of the worlds leading company that was hailed as a great and excellent company. In 2001, it was found that the company had been using accounting fraud to keep the company afloat. Along with their accounting firm, Arthur Anderson, they created fraudulent financial reports, which resulted in bankruptcy. Including, but not limited to, their reporting of assets were inflated, fraudulent or even nonexistent. In turn, thousands of employees and investors lost millions and millions of dollars.
Enron & SOX:
If SOX has been the law prior to the Enron scandal and the many others of corporate scandals, I think it would have prevented their wrongdoing. Since SOX was a result of the Enron scandal, SOX's laws specifically try to prevent what happened with Enron. Among other act's regulation, SOX hold CEO's and CFO's responsible for the companies financial reporting and make it mandatory to disclose the CEO & CFO compensation and profits. These two alone hold senior officers accountable and liable for their action, which in turn will help prevent the scandal that happened at Enron.
Please join StudyMode to read the full document