September 14, 2010
Sarbanes-Oxley Act 2002
Extra Credit Report
The Sarbanes-Oxley Act of 2002 was a piece of legislation that came into effect in 2002 which introduced major changes to the regulations of the many financial practices as well as corporate governance. This particular piece of legislation was named after Senator Paul Sarbanes and Representative Michael Oxley. In this paper I will be discussing the overview, intended purpose, and whether or not SOA was a success or failure. Overview
The Sarbanes-Oxley Act of 2002 has been deemed as being the most significant change to securities laws since the 1934 Securities Exchange Act. The Sarbanes-Oxley Act was signed by President George W. Bush in 2002, and became effective on July 30th of that year. The Sarbanes-Oxley Act, which is often times referred to as “SOX”, was an act that set forth records management as well as retention policies for all public companies. This particular act was enacted in response to corporate scandals that involved large corporations, the Enron scandal being one of the more popular. (Anand, 2004) The Sarbanes-Oxley Act requires all financial reports to include an internal control report. What an internal control report is designed to do is to show the company’s financial data accurately. Companies have confidence in these particular reports because its adequate controls are in place at all times in order to safeguard financial data. All year-end financial reports must always contain an assessment of the effectiveness of all internal controls. (Anand, 2004) Intended Purpose
The intended purpose of the Sarbanes-Oxley Act was passed in the spot light of major corporate scandals. What a lot of these scandals had in common were that they engaged in skewed reporting of selected transactions. For example companies such as Enron, Tyco, and WorldCom misrepresented a variety of questionable transactions which ultimately...