Primer on the Sarbanes-Oxley Act 2002
Introduction
In the beginning years of the new century a series of huge corporate frauds predominated the business sections and front pages of dominant newspapers, shaking public confidence in the integrity of corporate America. Those scandals also raise serious questions about the integrity, acuity and prudence of business leaders and accountants who structure and document business transactions, approve required financial disclosures, and, in the case of accountants, certify the accuracy of required reports (Enrione, Mazza, & Zerboni, 2006).
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).
Legislated Ethical Issues in SOX
The legislation of ethics is not just a modern occurrence, but the feeling that an individual can do so is debatable. Just because an individual keeps the letter of the law, does not necessarily make him or her ethical. Graham (1995) argues that ethical decisions come not from those in authority (of which is the law), but are “independently arrived at principled beliefs that are used creatively in the analysis and resolution of moral dilemmas” (p. 47).
SOX outlines and legislates several areas which are common sense, and moral fiber should indicate the domain of ethics, and resolved voluntarily by the parties involved. This focus
In the beginning years of the new century a series of huge corporate frauds predominated the business sections and front pages of dominant newspapers, shaking public confidence in the integrity of corporate America. Those scandals also raise serious questions about the integrity, acuity and prudence of business leaders and accountants who structure and document business transactions, approve required financial disclosures, and, in the case of accountants, certify the accuracy of required reports (Enrione, Mazza, & Zerboni, 2006).
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).
Legislated Ethical Issues in SOX
The legislation of ethics is not just a modern occurrence, but the feeling that an individual can do so is debatable. Just because an individual keeps the letter of the law, does not necessarily make him or her ethical. Graham (1995) argues that ethical decisions come not from those in authority (of which is the law), but are “independently arrived at principled beliefs that are used creatively in the analysis and resolution of moral dilemmas” (p. 47).
SOX outlines and legislates several areas which are common sense, and moral fiber should indicate the domain of ethics, and resolved voluntarily by the parties involved. This focus