Analysis Of The Sarbanes And Oxley Act Of 2002 (SOX)

Improved Essays
The Sarbanes and Oxley Act of 2002 (SOX) was put into place because of outrageous fraud acts that were conducted by U.S. corporations that led to the layoffs of thousands of Americans. Companies were self-auditing therefore creating conflicts that might inflate accounting statements. The executives of the companies were not savvy enough to understand the complex forms to do addition checks on initial reporting. I this report the major topics that will be discussed are Mistakes made by the company and leadership, steps that could have been taken to prevent to avoid the repercussions of Sarbanes and Oxley Act of 2002. Market pressures that led to unethical behaviors, influence of the basics of finance and how Sarbanes and Oxley Act of 2002 has …show more content…
With every new technology that is launch an accountant must be in compliance with Sarbanes and Oxley Act of 2002 which inevitably slows the process of innovation to make sure all processes are in conjunction with Sarbanes and Oxley Act of 2002. “Firms are hiring extra accountants, consultants and even full-time staff to handle accounting procedures required by the act” (Kessler, 2004). Kessler points out the potential hinderence to companies whom are trying to innovate but are set back do to the Sarbanes and Oxley Act of …show more content…
The events that led to the Sarbanes and Oxley Act of 2002 where falsification of accounting documents that lead to employees losing their jobs and a bad public image portrayed by the offending companies. Steps that could have been taken to avoid the enactment of Sarbanes and Oxley Act of 2002, were to make sure the figures reported were accurate and reflected the true standing of the company. Independent auditing could have been accomplished to assure ethical practice. The role of market pressures made for unethical behavior in the way of creating false figures to compete with other companies and or have the offending company be bench marked against. to give investors the peace of mind of the company being stable and a low risk investment. Influence of basics of finance and how the Sarbanes and Oxley Act of 2002 changed finance was to give investors the peace of mind of the company being stable and a low risk investment if the financial statements were changed to give the appearance of a thriving company. Influence on ethical behavior since Sarbanes and Oxley Act of 2002 was enacted has been one of being watchful of what is being reported and following guidelines to protect the company from a potentially tarnished image. The Changes in the presentation of financial

Related Documents

  • Decent Essays

    SOX has its pro’s and con’s. Some claimed that it imposes tremendous new efforts and costs on public companies. On the contrary, others find it as more advantageous. However, if pros outweigh the cons that a company can get, then perhaps it is worth to comply the said law. As discussed in this article, SOX had led to greater internal control of financial reporting, and had increased the expertise and independence among more-focused executives in the organizations.…

    • 238 Words
    • 1 Pages
    Decent Essays
  • Improved Essays

    Trinity Industries

    • 623 Words
    • 3 Pages

    Trinity Industries is a successful and properly operating company who never had to restate their earning from previous years. However, Don Collum VP of Trinity Industries, had described the company in 2003 as a candidate for material weakness as defined by Sarbanes-Oxley Act (SOX). The company was deficient in internal control process in the area of documentation and evidence that controls had been performed which could lead to material weakness. Sarbanes-Oxley (SOX) was created in 2002 because of all the accounting fraud that were being reported from publicly held companies. SOX job is to protect investors by preventing financial statement fraud, strengthen internal control, and punishing executives for fraud.…

    • 623 Words
    • 3 Pages
    Improved Essays
  • Improved Essays

    Several different guidelines have been put in place to insure that financial reporting is done correctly and accurately. International Financial Reporting Standards or IFRS guidelines where adopted to insure that all companies gather and disclose their information in the same manner. In response to the Enron bankruptcy in late 2001 Sarbanes Oxley Act (SOX) was enacted. SOX reformed; the auditing and accounting procedure which included internal controls and checks and balances, brought into focus oversight responsibility of corporate director and officers making it mandatory to disclose bonuses and special considerations, addressed conflicts of interest and required the chief executives to certify tax documents and financial statements. Where SOX created standard checks and balances with strong auditing/accounting procedures as well as made penalties for fraudulent activates the SEC required disclosure obligations.…

    • 860 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Sarbanes-Oxley Act, Section 301: Public Company Audit Committees, is created to address systemic and structural weaknesses that affecting the US capital markets due to failures of audit effectiveness and corporate financial responsibility that could potentially “threatened the reputation of those markets for integrity (Tsacoumis, S, Bess, S, and Sappington, A, 2003).” Section 301 provided appropriate regulatory authority of the audit committee the power to overseeing the accounting and financial reporting processes of the issues and financial reporting processes of the issuer and audits of the financial statements of the issuer (Public Law, 2002). Under SOX, audit committees shall be members of the board of directors of the issuer and must…

    • 319 Words
    • 2 Pages
    Improved Essays
  • Decent Essays

    In 1992, while the COSO model was put in place, its real claim to fame came from the subsequent release of the Sarbanes-Oxley Act of 2004. COSO became the most widely used control framework used in managements’ assessment of the internal control environment during this time. However, that is not the model’s sole purpose, as the COSO model is relevant to all companies and institutions when establishing a concrete internal control…

    • 72 Words
    • 1 Pages
    Decent Essays
  • Improved Essays

    The Sarbanes-Oxley Act of 2002 gave the PCAOB the authority to investigate and impose disciplinary sanctions against any individual or any registered public accounting firms that violate any of the accounting standard. These standard include those set by the PCAOB and the Security and Exchange Commission, professional standards that governs brokers, dealers and auditors of public companies. PCAOB Rules 5000-5113 outlines the PCAOB’s authority to conduct inquiries and investigations. PCAOB will often conclude its inspection with the issuance a final inspection report. Inquiries and investigations are conducted when a violation is suspected during an inspection or information from whistleblowers or informants.…

    • 937 Words
    • 4 Pages
    Improved Essays
  • Great Essays

    Contrast the applicability of the Sarbanes-Oxley Act to domestic public accounting firms versus foreign public accounting firms. Any foreign public accounting firm that prepares or furnishes an audit report shall be subject to the Act in the same manner as a public accounting firm (Gibson, 2013). 9. Describe the recognition of accounting standards by the Commission as provided.…

    • 1289 Words
    • 6 Pages
    Great Essays
  • Superior Essays

    Compare and contrast the different federal safeguards that are in place to reduce financial reporting abuse. Why are these considered appropriate safeguards? The Gramm-Leach Bliley Act, which refers to all financial institutions to explain to theis clients all information related to their accounts and keep private information of their customers, the financial institution is also forced to give out customer’s privacy notices to explain their information-sharing practices.…

    • 1110 Words
    • 4 Pages
    Superior Essays
  • Improved Essays

    The Sarbanes-Oxley Act (SOX) was put into place in 2002 by Congress after being developed by Senator Paul Sarbanes and Representative Michael Oxley. The purpose of SOX is to “protect shareholders and other stakeholders of publicly traded companies” (Vanderbeck, 2013, p. 11). SOX became about because although The United States already had the Securities Act of 1933 it only held the corporations responsible, therefore, the CEO’s did not have to legally tell the truth making it hard hold them responsible for their actions. There are many important parts to the act. In this paper, I will discuss some of the importances of the act, the impact it has had on The United States, and the pros and cons.…

    • 858 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    In 2002, the Sarbanes-Oxley (SOX) Act was passed by congress and signed into law by President George W. Bush. SOX was written as a response to several major accounting scandals that occurred at large companies (including Enron, WorldCom, and Tyco) in the early 2000’s. These scandals forced capital providers and the general public to question the judgement of public accounting firms as well as at the overall reliability of the financial reporting and audit process. The requirements included in SOX were designed to improve audit quality, increase the reliability of financial reporting, bolster corporate governance, and re-establish public and investor confidence in the financial reporting process. Some of the most impactful aspects of the Act…

    • 727 Words
    • 3 Pages
    Improved Essays
  • Improved Essays

    Stock analysts and rating agencies will have improved information (Thorne, O. Ferrell, & L. Ferrell, 2011, p. 156). Senior managers, auditors, and board members will have greater accountability with stiff penalties if laws should be broken (Thorne, O. Ferrell, & L. Ferrell, 2011, p. 156). The Sarbanes-Oxley Act legislation was the start to tougher regulations and more compliance of public corporations. The latest financial crisis in 2008-2009 proves that we need strict regulations and better oversight from the…

    • 824 Words
    • 4 Pages
    Improved Essays
  • Decent Essays

    Yes, I believe so. The Sarbanes Oxley (SOX) act was passed in 2002 in order to reduce the opportunity for conflict of interest in certain instances where an organization may provide both financial auditing and consulting to the same business (Ferrell, Fradedrich & Ferrell, 2013). Where Enron had a major ethical breach was in that Arthur Anderson provided both services and failed to offer sound financial information when it was needed. The Sarbanes – Oxley Act was intended to protect investors through forcing a higher level of accuracy in financial disclosure while providing penalties for failing to do so (Kecskes, 2016). There has been evidence shown to indicate the Sarbanes Oxley act has reduced fraud on a similar scale where a whistleblower…

    • 234 Words
    • 1 Pages
    Decent Essays
  • Improved Essays

    Even though these improvements have resulted with some costs, the benefits have outweighed the costs. Those companies that have put in the effort to make sacrifices to improve their financial reporting methods have seen excellent results. The full reporting standards have become more strict since the establishment of the Sarbanes-Oxley Act, yet the decrease in flexibility adds a sense of structure for companies. While these changes have enforced adjustments, throughout these last fourteen years the U.S. economy has been able to dodge many problems like Enron. Those companies that could not or would not accommodate are no longer present.…

    • 929 Words
    • 4 Pages
    Improved Essays
  • Great Essays

    Overall, the Sarbanes-Oxley Act has been credited for strengthening at least two investor areas, which include the CFO and CEO responsibility and accountability for the organizations finances and the increase in professionalism among the corporate auditor committees (Verschoor, 2012). There have been many changes to the public corporations financial reporting and the mandating of public codes of ethics. Overall, the Sarbanes-Oxley Act has intended to restore the integrity into the corporate world. There are areas for improvements and many critics of the Sarbanes-Oxley Act, there may still be plenty of fraud but if the Act was not implemented the fraudulent acts, and misstatements would be worse (Sweeney, 2012). It is important that effective leaders are the ones employed in the executive level positions and any wrongdoers are held accountable for their actions to the fullest…

    • 1725 Words
    • 7 Pages
    Great Essays
  • Improved Essays

    The system of accounting regulation is divided between the corporate law and promulgated standards. Over the years, non-government organizations had a significant influence on accounting settings. One of their responsibilities is to address technical issues of accounting activities, enforce adequate auditing mechanisms, and build ethical standards to guarantee the fairness of financial reporting (p.…

    • 1031 Words
    • 4 Pages
    Improved Essays