The Sarbanes-Oxley Act of 2002 (SOX) was a direct output of the financial statement fraud that sank industry giants such as Enron and WorldCom. I)
What are the primary goals and tenets of SOX with respect to fraud? II)
How is SOX enforced?
What is PCAOB, its role, and based upon individual research, is it an effective oversight body? IV)
Based upon what the goals of SOX were, how it is implemented and enforced, through your own experience and research (both if applicable) has SOX been a successful deterrent to financial statement fraud?
The Sarbanes-Oxley Act of 2002 was created to reduce financial statement fraud by two main congressmen; Senator Paul Sarbanes and Representative Michael Oxley. The provisions made came after two major companies were caught in the largest financial statement fraud schemes to date, Enron and WorldCom. Falsifying financial documents ahs become a detrimental issue over the past few decades and SOX is aimed at solving this ever-present problem. SOX was created for several reasons; â€œto establish higher standards for corporate governance and accountability, to create an independent regulatory framework for the accounting profession, to enhance the quality and transparency of financial reports, to develop severe civil and criminal penalties for corporate wrongdoers, and to establish new protections for corporate whistleblowers.â€ (Wells, 277) The PCAOB is the Public Company Accounting Oversight Board that was established by Congress under Title 1 of the Sarbanes-Oxley Act to oversee and enforce the act. The SEC (Securities and Exchange Commission) has authority over the PCAOB, which includes approval of the Boards rules, standards and budget. The PCAOB consists of five members, two who are CPAâ€™s or have been CPAâ€™s and three who have never been CPAâ€™s. The PCAOB has authority to investigate public accounting firms and it's staff members, and all investigations and disciplinary proceedings are confidential until there...
References: Deloitte Forensic Center. (April 27, 2010), Majority of Business Professionals Expect More Financial Statement Fraud to be Uncovered in 2010, 2011, Compared to the Last Three Years. New York. Corporate Compliance Insights.
Public Company Accounting Oversight Board. (2003-2011) http://pcaobus.org/Pages/default.aspx
Wells, J.T. (2008), Principles of Fraud Examination, (2nd Edition). Hoboken, New Jersey: John Wiley & Sons Inc.
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