Preview

Private Securities Reform Act of 1995

Good Essays
Open Document
Open Document
1275 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Private Securities Reform Act of 1995
Some of the ways that the Private Securities Reform Act of 1995 changed both the responsibilities and at the same time benefited auditors The Reform Act:
Places a cap on damages that would potentially reduce the maximum amount that auditor’s could be liable for.
Requires plaintiffs to pay defendant’s reasonable attorney’s fees and expenses directly related to litigation found by the court to be frivolous and unwarranted. This may make it unlikely that auditor’s will be sued for deep pockets if the suit is found to be frivolous and unwarranted.
Provides for a stay of discovery during the period a motion to dismiss is pending, thereby reducing a cost that often forces innocent parties to settle frivolous class action suits.
Limits punitive damages by eliminating securities fraud as a basis for bringing action under the Racketeer Influenced and Corrupt Organization Act which provides for treble damages. The limit on punitive damages will directly reduce the cost of damages to auditors.
Places limits on the rights of third parties to sue by limiting the number of times a plaintiff can be a lead plaintiff to no more than five class actions in any three-year period and by imposing stricter pleading standards to be met by plaintiffs. This limits the number of individuals that may sue auditors and reduces the likelihood of suit by “professional plaintiffs.”
Changes the manner in which the court appoints lead plaintiffs in class actions to favor institutional investors likely to have the largest financial state in the relief sought and to mitigate the “race to the courthouse by professional plaintiffs” who hold minimal ownership interests. This also limits the number of individuals that may sue auditors and reduces the likelihood of suit by “professional plaintiffs.”

4-17. a. Following is a list of key changes for auditors as a result of the Sarbanes – Oxley Act of 2002.
A number of non-attest services are prohibited for auditors of public

You May Also Find These Documents Helpful

  • Good Essays

    Law 421 Week 1 Summary

    • 1057 Words
    • 5 Pages

    The Sarbanes-Oxley Act of 2002 was put in to place as a way of preventing and deterring future accounting fraud, protecting shareholders, and increasing confidence in public company financial reporting. However, SOX has imposed tremendous new duties and costs on public companies and accounting firms. Some individuals may call it an object failure while SOX hoped to create more confidence in capital markets it does not prevent fraud or abuse from occurring.…

    • 1057 Words
    • 5 Pages
    Good Essays
  • Satisfactory Essays

    ACC 491 Week 1 DQ 2

    • 485 Words
    • 3 Pages

    The Sarbanes-Oxley Act of 2002 has been described as the most far-reaching legislation affecting business since the passage of the 1933 Securities Act. What are the specific portions of the legislation that affect the external audit profession, and how do they affect the profession? How does the legislation affect the internal audit profession? What are some activities that are implied in the legislation, as well as activities that will likely emerge as companies implement various provisions of the act? Do you believe the legislation enhances the power and prestige of the audit profession, or alternatively, does it decrease both the power and prestige of the profession? Explain.…

    • 485 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    mgt 132 study guide

    • 2072 Words
    • 9 Pages

    -toughened penalties for corporate fraud and restricted the types of consulting CPAs may perform for public company audit clients…

    • 2072 Words
    • 9 Pages
    Powerful Essays
  • Powerful Essays

    Sox Act

    • 2419 Words
    • 10 Pages

    This was an act that was passed into law in 2002 by the United States congress to protect American investors from fraudulent American activities by corporations in response to the scandals that were seen in the early 2000s (United States Securities and Exchange Commission 2009). This act created new standards to be followed by corporate accountability in the USA and new penalties in case a corporate agency was involved in frauds. This act came with new specifics on financial reporting responsibilities such as strict adherence to new internal procedures and controls that were formulated to ensure that all financial records were accurate and valid. By improving the accuracy and reliability of all disclosures by corporate, the act affirmed that all investors were protected as per the security laws.…

    • 2419 Words
    • 10 Pages
    Powerful Essays
  • Good Essays

    AU Section 317 Case Study

    • 960 Words
    • 4 Pages

    The government has well intentioned regulations enacted to protect individuals and organizations from an action or an omission that violates or influences the material reliability of a financial statement or audit. Illegal acts committed by clients must segregate activities that do not include the entity that is having their financial statements audited. Equally, illegal acts also include the acts of management or individuals that act in the interest of the aforementioned entity.…

    • 960 Words
    • 4 Pages
    Good Essays
  • Better Essays

    Sarbanes Oxley Act of 2002

    • 1322 Words
    • 4 Pages

    Descriptions of the main aspects of the regulatory environment which will protect the public from fraud within corporations are going to be provided in this paper. A special attention to the Sarbanes – Oxley Act of 2002 (SOX) requirement; along with an evaluation of whether Sarbanes-Oxley Act will be effective in avoiding future frauds based on their implemented rules and regulations.…

    • 1322 Words
    • 4 Pages
    Better Essays
  • Powerful Essays

    Sarbanes-Oxley Act of 2002

    • 1496 Words
    • 6 Pages

    Sarbanes-Oxley Act of 2002 is the most far-reaching change in organizational control and accounting regulations since the Securities and Exchange Act of 1934. The new law made securities fraud a criminal offense and made more strict penalties for corporate fraud. The law now requires top executives to sign off on their firms financial reports, and they risk fines and long jail sentences if they…

    • 1496 Words
    • 6 Pages
    Powerful Essays
  • Good Essays

    Congress responded by enacting the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), which became effective on July 30, 2002. Sarbanes-Oxley makes many changes in the securities regulation process to improve corporate governance and reporting. It imposes harsh penalties on violators, creates an elaborate system for governing and regulating auditors for public companies, and requires the securities industry’s self-regulatory organizations to adopt rules to prevent conflicts of interest and enhance the independence of securities analysts. Even casual observers of the political reaction to the stunning disclosures about Enron, WorldCom and Tyco’s deceitful financial practices might have predicted some such legislative response (Jennings, 2010, p. 212).…

    • 766 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    Test Bank

    • 21854 Words
    • 88 Pages

    Auditors are potentially liable for monetary damages and subject to criminal penalties for failure to perform professional services properly.…

    • 21854 Words
    • 88 Pages
    Powerful Essays
  • Better Essays

    The Sarbanes-Oxley Act

    • 1467 Words
    • 6 Pages

    The Sarbanes-Oxley Act was established in 2002 and has initiated extensive transformation to the parameter of economic practice and shared bureaucracy. Nevertheless, it was named after Legislator Paul Sarbanes and Representative Michael Oxley, who were the founders, given it the title Sarbanes-Oxley Act of 2002. On July 30, 2002, President George Bush signed off on SOX, revising the security laws that, moderately, reevaluate the responsibility of accountants. Although the focal point of this statute is on shared organizations, it is projected that banks and investors, who necessitate reviewed reports of the…

    • 1467 Words
    • 6 Pages
    Better Essays
  • Better Essays

    The Sarbanes-Oxley Act

    • 1327 Words
    • 6 Pages

    The legislation was to redeem the confidence and faith of the public in the capital markets as well as strengthen corporate accounting controls. So far in the political arena, the law has achieved its goals; more people have faith in the stock market (Gilson 5). Nevertheless, in the economic wise, the reports, observation and the trend of life the Act has caused is not pleasing. The Act did create a series of oversight measures as well as increase the sanctions for white collar crimes; frauds and accounting malpractices just to mention a few. This law meant well but economists could not help reflecting on what the implications on the economy that would be as a result of the new law (Gilson 5-6). The Act provides for the establishment of the Public Accounting Oversight Board to supervise the accounting industry to ensure that cases of conflict of interest are not repeated as was in case in the Enron fraud. The Act proscribes auditors from being consultants in the audit works of their clients (Gilson 6). Executives are also not allowed to receive loans from the company they work…

    • 1327 Words
    • 6 Pages
    Better Essays
  • Good Essays

    Article Review - Sox Act

    • 686 Words
    • 3 Pages

    Hunter’s article examines how the Sarbanes-Oxley Act (SOX Act) is too stringent and gives too much power over companies to governing bodies, i.e. the Public Company Accounting Oversight Board (PCAOB) (Hunter, 2007). It discusses how the SOX Act is unfair to domestic and foreign and small and large companies, their shareholders, and the public. The piece explains how the Act may compel some companies to use unethical actions to conduct business and prevent accruing penalties (Hunter, 2007).…

    • 686 Words
    • 3 Pages
    Good Essays
  • Better Essays

    The Sarbanes-Oxley Act

    • 2083 Words
    • 9 Pages

    Chapter 5: the Sarbanes- Oxley act of 2002 involved the public anger that started when Enron, WorldCom, and other big companies scandals. This is when there was support for white collar crime when it came to accounting standards. Under the law of federal sentencing rules to make sure that white collar criminals are being punished. (Barnes, 2012). 1. For someone to alter or get rid of documents and there intensions to obstruct or effect the crime/case. 2. The CEO (chief executive officer) and the CFO (chief financial officer) must clarify that repots have been submitted to the SEC (securities and exchange commission.) it is a crime if the CEO and CFO make a report that is false. 3 CEO and CFO must reimburse the company for any raises and if…

    • 2083 Words
    • 9 Pages
    Better Essays
  • Powerful Essays

    firms that provide external audits of companies that report to the SEC must register with…

    • 1377 Words
    • 6 Pages
    Powerful Essays
  • Powerful Essays

    The Sarbanes-Oxley Act

    • 1677 Words
    • 7 Pages

    The 1980s was a time where many corporate misbehaviors and takeovers cost many people their jobs. The Treadway Commission, named after the organizer James C. Treadway, Jr., took the lead in examining the factors why companies misbehave and made recommendations to reduce fraudulent financial reporting. A group of private sectors in the accounting profession volunteered to carry out the goals of the Treadway Commission. This led to the formation of the Committee of Sponsoring Organizations of the Treadway Commission, also known as COSO (Arens, Elders, & Beasley, 2010). COSO was the venue in driving the swift passage of SOX. SOX established the Public Company Accounting Oversight Board (PCAOB) under the oversight of the Securities and Exchange Commission (SEC). The board is charged with the responsibility of overseeing and disciplining independent accounting firms in their role as auditors for public companies. The board has oversight on the implementation of stricter corporate governance, more disciplined exercise of auditor’s independence, enhanced audit reporting, more frequent review of control risk assessments and more informative report disclosures. Under the Sox, the SEC required firms to register with PCAOB to monitor strict compliance of SOX standards in the manner by which public accounting…

    • 1677 Words
    • 7 Pages
    Powerful Essays