sarbanes-oxley act of 2002 essay

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The Sarbanes “ Oxley Act of 2002 was signed into law in July 2002. It makes the most significant changes in corporate governance since the Securities Act of 1933 and the Securities Exchange Act of 1934. The purpose of the new law is to protect investors by improving the accuracy and reliability of corporate disclosures. The law created an independent Public Company Accounting Oversight Board to oversee the audit of public interest in providing informative and accurate information. Another part of the law requires executive certification of accuracy and completeness of annual and quarterly reports submitted to the SEC. The Sarbanes “ Oxley Act also calls for the independence of board members and the ability of shareholders to fire the board or board members not acting in the interests of said shareholders. This Act deals with corporate and criminal fraud, and provides criminal penalties for defrauding shareholders of publicly traded companies. In March 2003, the USA Attorney for the Northern District of Alabama charged the Vice President of Finance of Health South with conspiracy to commit wire and securities fraud in a .4 billion scandal and four former CFOs pled guilty to fraud charges. Part of the charge was under the executive certification  clause of the Sarbanes “ Oxley Act. This should send a strong signal to those who certify financial statements (Klimstra, C. T.). The Sarbanes “ Oxley Act of 2002 was government's intervention into market problems caused by the bankruptcy of Enron and WorldCom. Arising from the investigation, it became clear that full disclosure was not made available to the CEO, the board members, and the shareholders. In Enron's situation speculation was done off the balance sheet using derivatives and dummy corporations. The CEO and the board members were unaware that these transactions were taking place. The result was that shareholders.
Abstract In this research paper I will investigate in the issues related to the Sarbanes-Oxley Act, its overview, contents, historical prerequisites, as well as present research materials regarding the factual benefits of its implementation on practice. I will also attempt critically evaluate Sarbanes-Oxley Act and present its advantages and disadvantages from the standpoint of current economic situation. 1. Introduction Sarbanes-Oxley Act, which is frequently referred to as SOX or Sarbox, was introduced 6 years ago in 2002, or to be more specific, was enacted on July, 30 2002. This act is also known as the Public Company Accounting Reform and Investor Protection Act of 2002. This act appeared not at once without any reasons, there were serious prerequisites for its development and enactment. There was a series of accounting and corporate scandals that influenced such companies as Tyco International, Enron, ImClone, WorldCom, Global Crossing, Adelphia and Peregrine Systems. During scandals with mentioned companied involved, investors lost billions of dollars and there was no legal act to protect their investments in any way. These scandals not just caused enormous money loss, but also severely decreased public confidence in the securities market of the USA. __________________________________________________________ We Can Write Custom Research Papers on Sarbanes-Oxley Act for You! __________________________________________________________ The Act was named after its sponsors- Senator Paul Sarbanes and Representative Michael G. Oxley, approved by the House of Representatives and signed into law by the President George W. Bush. This act is often considered one of the most outstanding proactive reforms during last several decades. Sarbanes-Oxley Act contains 11 titles, which provide the description of specific requirements and mandates for financial reporting. There are.
Only available on StudyMode Read full document → Save to my library Running Head: SARBANES OXLEY ACT Sarbanes Oxley Act Introduction Sarbanes Oxley Act is focused towards identifying accounting frauds in different public companies. This paper discusses about various reasons for the introduction of Sarbanes Oxley Act and causes that has been overlooked. Causes for Sarbanes-Oxley Act Sarbanes Oxley Act is US federal law, which is established in order to set out the some standards for accounting firms, public company boards and management. These standards are established in order to overcome the problem of accounting scandals. Companies such as Enron and WorldCom have created major accounting scandals. Sarbanes-Oxley Act protects the investors from the accounting scandals and frauds created by corporations (Vay, 2006). It has also introduced provision for the improvement in internal auditing of the firm. In addition to this financial reporting control mechanism has also enhanced, which helps in detecting the fraud easily. It has been analyzed that auditors are not able to detect the frauds easily. Manipulations in the financial records are not identified by the auditors and they rely on the false information within the financial statement. It has been analyzed that SOX eliminate the conflict of interest by threatening the auditing firm for the non-auditing business created by the auditors. It has been analyzed that Sarbanes Oxley Act helps in identifying the person, who is individually responsible for the fraud. Earlier court is not able to identify the exact person, who is responsible for committing the crime (Fletcher & Plette, 2008). Sarbanes Oxley Act requires attest of the concern person regarding the accuracy of financial statement. It has been analyzed that frauds created by many big companies such as Enron, WorldCom, etc. has arises the need of Sarbanes Oxley.