December 8, 2012
The Sarbanes-Oxley Act was passed in 2002 after a number of corporate scandals including Tyco International, WorldCom, and most notably, Enron. While this legislation does not apply to private firms, it is important information for entrepreneurs to know what Sarbanes-Oxley is. Faulty accounting practices and dishonest business procedures robbed the public of its trust in corporate America and cost the economy thousands of jobs. Public dismay grew into outrage and soon the executive officers of these companies were summoned before congress to testify about their involvement in the illegal business activities which robbed shareholders of billions of dollars. These companies performed a number of dishonest and unlawful actions in order to falsely manipulate their stock price, hide their losses and project a façade of profitability, and cover up insider trading and options granted to executives. The Sarbanes-Oxley Act was intended to protect the interest of those who invest in publicly traded companies by improving the reliability and accuracy of corporate financial reports and disclosures (Garrison, Noreen & Brewer, 2010). It is also intended to protect whistle blower that come forward from stress and punishment and the company they work at. What is the Sarbanes-Oxley Act?
The Sarbanes-Oxley Act was signed into law on 30 July 2002 by President Bush. The Act is designed to oversee the financial reporting landscape for finance professionals. Its purpose is to review legislative audit requirements and to protect investors by improving the accuracy and reliability of corporate disclosures. The act covers issues such as establishing a public company accounting oversight board, auditor independence, corporate responsibility and enhanced financial disclosure. It also significantly tightens accountability standards for directors and officers, auditors, securities analysts and legal counsel. The law is named after Senator Paul Sarbanes and Representative Michael G. Oxley. U.S. Senator Paul Sarbanes
Senator Sarbanes was elected to the United States Senate in 1976, and re-elected in 1982, 1988, 1994, and 2000. In response to the 2001 failure of Enron Corporation and accounting woes at WorldCom, Senator Sarbanes - in his capacity as Chairman of the Senate Banking Committee held a series of comprehensive hearings resulting in the passage of a bi-partisan bill designed to reform the accounting industry and restore the investor confidence that had been eroded. "The Public Company Accounting Reform and Investor Protection Act," now known as the "Sarbanes-Oxley Act," was signed into law on July 30, 2002, and is considered one of the most far-reaching reforms of American business practices since the Great Depression (University of Maryland, 2006). U.S. Representative Michael G. Oxley
Mr. Michael G. Oxley, Mike serves as Senior Advisor to the Board of Directors of NASDAQ OMX Group, Inc. Mr. Oxley serves as an Attorney with Baker Hostetler in Washington, DC. He served for 25 years as U.S. Representative of Ohio's Fourth Congressional District. He was appointed Chairman of the House Financial Services Committee in 2001. During his tenure as Chairman, he co-authored the Sarbanes-Oxley Act of 2002, and created a new accounting oversight board for publicly ... traded companies. He served as Vice Chairman of NASDAQ OMX Group Inc. (formerly, NASDAQ Stock Market Inc.) since March 15, 2007 and served as its Director. Mr. Oxley serves as the Chairman of Ethics Resource Center. He serves as a Member of Board of Trustees of The University of Findlay. He serves as a Member of The Board of Directors at Paragon Systems, Inc. He has been a Director of Pinkerton Government Services, Inc. since January 2010 (Bloomsberg, 2012). Corporate and Accounting Scandals
There were a lot of corporate...
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