What Is The Sarbanes-Oxley Act
Sarbanes-Oxley Act
In recent years, many companies have grown to conglomerate status and then cut down to nothing through misleading management practices, unethical leaders, and non-regulated accounting methods. Investors are happy when they are making money from these rising businesses and then devastated and sometimes completely ruined by their fall.
The world of business has come a long way since the laissez-faire government attitudes of the 19th Century. Governmental rules and regulations have emerged over the past century in reaction to the excessive business power of the corporation. The government has frequently stepped in to protect business stakeholders after failed corporate governance. According to (Public Law 107-204-July …show more content…
30, 2002, n.d.):“To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes” was begun. A short six months later, on July 30th, 2002, President George W. Bush, signed the “Public Company Accounting Reform and Investor Protection Act of 2002” into law. The act is also known as the “Sarbanes-Oxley Act of 2002” or SOX for short. All organizations, regardless of size, are required to comply with SOX. The government stepped in to rectify increasing fraud and unethical accounting practices of billion dollar corporations in the United States that were ultimately ruining the securities that many Americans had counted on and trusted. According to (Staff Writers TechNewscom, 2002): “stiffen penalties for white-collar criminals and force auditors to become more independent of their clients.” For ensuring complete truth in the reporting of their financial status, the SOX regulate the financial practices of publicly traded corporations through specific audit rules.
The story was backed to a decade ago, the three major corporations included Enron, WorldCom, and Tyco International led to and were affected by the expedited legislation known as the Sarbanes-Oxley Act.
Was established in 1985, Enron was an American energy trading company based in Houston, Texas through the merger of two pipeline companies, Houston Natural Gas and Internorth Corporation. Enron Corporation set Special Purpose Vehicles are subsidiary corporations which are designed by the parent company to hide its debt and cheat the public. The essential purpose is to increase the companies’ profit and reputation, and it allows the general public to purchase its stock. In August of 2000, Enron reaches its peak market value of $68 Billion. By December 2001, Enron was in bankruptcy. Under the cloud of its financial scandals, the price per share plummeted from nearly $100 a share to less than 50¢ a share. On May 25, 2006, Enron was convicted of defrauding the public. Arthur Andersen, Enron’s auditors, allowed the chaos, and they had no paid for the responsibility of professional care. Enron was one of its biggest clients. It earned $27 million from Enron for consulting services, and only $25 million on auditing. At the time, Andersen was one of the top five accounting firms in the world. At the end, it was dissoluble due to its role in Enron’s financial scandal, and it committed auditing …show more content…
fraud.
GAAS requires auditors to exercise due care in the performance of the audit and the preparation of the report. Due care encompasses the employment of reasonable care and diligence as well as the critical review at every level of supervision of the work done and the judgment exercised by those assisting in the audit. There is no doubt that Sarbanes-Oxley legislation was a major change to the landscape of American business. The SOX not only has restored confidence in business by the American public but also has led to ethics programs in businesses and held top corporate officials accountable for their actions and commanded them to be examples of ethical behavior. With the history of companies like Enron, WorldCom, and Tyco, it is a proof that greed and power can be corruptive.
It’s an exciting and challenging time for new graduates to enter the profession.
Today’s auditors play a crucial role in business and society. They are expected to be intellectually honest to perform an audit with an independent mind for presenting unbiased information and to recognize that they are hired to protect the interests of outsiders. Additional, accountants must not only be competent in the provision of professional services but also must cooperate with other members to improve the art of accounting. The final word for the accountants is that they must be complete compliance for the SOX without looking around for finding any chances being a
wrongdoer.
In recent years, many companies have grown to conglomerate status and then cut down to nothing through misleading management practices, unethical leaders, and non-regulated accounting methods. Investors are happy when they are making money from these rising businesses and then devastated and sometimes completely ruined by their fall.
The world of business has come a long way since the laissez-faire government attitudes of the 19th Century. Governmental rules and regulations have emerged over the past century in reaction to the excessive business power of the corporation. The government has frequently stepped in to protect business stakeholders after failed corporate governance. According to (Public Law 107-204-July …show more content…
30, 2002, n.d.):“To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes” was begun. A short six months later, on July 30th, 2002, President George W. Bush, signed the “Public Company Accounting Reform and Investor Protection Act of 2002” into law. The act is also known as the “Sarbanes-Oxley Act of 2002” or SOX for short. All organizations, regardless of size, are required to comply with SOX. The government stepped in to rectify increasing fraud and unethical accounting practices of billion dollar corporations in the United States that were ultimately ruining the securities that many Americans had counted on and trusted. According to (Staff Writers TechNewscom, 2002): “stiffen penalties for white-collar criminals and force auditors to become more independent of their clients.” For ensuring complete truth in the reporting of their financial status, the SOX regulate the financial practices of publicly traded corporations through specific audit rules.
The story was backed to a decade ago, the three major corporations included Enron, WorldCom, and Tyco International led to and were affected by the expedited legislation known as the Sarbanes-Oxley Act.
Was established in 1985, Enron was an American energy trading company based in Houston, Texas through the merger of two pipeline companies, Houston Natural Gas and Internorth Corporation. Enron Corporation set Special Purpose Vehicles are subsidiary corporations which are designed by the parent company to hide its debt and cheat the public. The essential purpose is to increase the companies’ profit and reputation, and it allows the general public to purchase its stock. In August of 2000, Enron reaches its peak market value of $68 Billion. By December 2001, Enron was in bankruptcy. Under the cloud of its financial scandals, the price per share plummeted from nearly $100 a share to less than 50¢ a share. On May 25, 2006, Enron was convicted of defrauding the public. Arthur Andersen, Enron’s auditors, allowed the chaos, and they had no paid for the responsibility of professional care. Enron was one of its biggest clients. It earned $27 million from Enron for consulting services, and only $25 million on auditing. At the time, Andersen was one of the top five accounting firms in the world. At the end, it was dissoluble due to its role in Enron’s financial scandal, and it committed auditing …show more content…
fraud.
GAAS requires auditors to exercise due care in the performance of the audit and the preparation of the report. Due care encompasses the employment of reasonable care and diligence as well as the critical review at every level of supervision of the work done and the judgment exercised by those assisting in the audit. There is no doubt that Sarbanes-Oxley legislation was a major change to the landscape of American business. The SOX not only has restored confidence in business by the American public but also has led to ethics programs in businesses and held top corporate officials accountable for their actions and commanded them to be examples of ethical behavior. With the history of companies like Enron, WorldCom, and Tyco, it is a proof that greed and power can be corruptive.
It’s an exciting and challenging time for new graduates to enter the profession.
Today’s auditors play a crucial role in business and society. They are expected to be intellectually honest to perform an audit with an independent mind for presenting unbiased information and to recognize that they are hired to protect the interests of outsiders. Additional, accountants must not only be competent in the provision of professional services but also must cooperate with other members to improve the art of accounting. The final word for the accountants is that they must be complete compliance for the SOX without looking around for finding any chances being a
wrongdoer.