Up and Coming
February 16, 2008
Letter of Intent
February 16, 2008
To:Up and Coming Accountants
I have written this report in order to fulfill my graduation requirements at Southwestern College. Also to become more knowledgeable on the Sarbanes-Oxley Act of 2002 (SOX) and the impact it has had on the business world.
Today I am addressing you on information that can help you have a quick overview of SOX. You may not be an accountant today but if you are studying a business or financial degree program you will learn the role that SOX has set in the business world.
You must be informed, on what SOX is set up for and the intent in which it is to be used.
I have enclosed a report on the importance of understanding definitions and common terms as well as the changes made. I will show you how not to make the errors other company’s have.
We will also take a quick glimpse at court cases that helped SOX to come about.
I would like for you to take from this report the knowledge and confidence that you are better informed on SOX.
Tanya D. Lange, Undergraduate Student
Table of Contents
Letter of Intenti
Purpose and Scope1
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 misrepresent their company’s financial position. Purpose and Scope
The purpose for writing this report is to inform. It is important to know where we were before the act and where we are now.
There are three main points to look at:
Understanding Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 is mandatory. All public organizations, large and small, must comply. However the act does not apply to private companies.
The assumptions I have are not all persons are aware of what SOX is, or why it was put into place. I also assume not everyone knows all that was involved with the fall of Enron and other such companies. As I had said previously I would be giving an overview and I hope you will remember this information if ever needed.
Enron Before its bankruptcy in late 2001, Enron employed around 22,000 people and was one of the world's leading electricity, natural gas, pulp and paper, and communications companies, with claimed revenues of $111 billion in 2000. Fortune named Enron "America's Most Innovative Company" for six consecutive years. At the end of 2001 it was revealed that its reported financial condition was sustained mostly by institutionalized, systematic, and creatively planned accounting fraud (McLean & Elkind, 2003). Tyco In 1992, Dennis Kozlowski became the CEO of Tyco International, and for the next several years, the company adopted an aggressive acquisition strategy, eventually acquiring some accounts over 1000 other companies between 1991 and 2001. Prior to 1997, Tyco was incorporated in Massachusetts. That July it merged with a wholly-owned subsidiary of a smaller publicly-traded security services company named ADT Limited. Upon consummation of the merger, Tyco International Ltd. of Massachusetts became a wholly-owned subsidiary of ADT Limited. In 1999, just prior to a stock split, rumors of accounting irregularities surfaced. The rumors were strongly denied by Tyco's leadership,...