Essay On The Sarbanes-Oxley Act Of 2002
The creation of the Sarbanes-Oxley Act of 2002 (SOX Act) by senator Paul Sarbanes and representative Michael G. Oxley impacted a change in the way accounting was reported by government and non government bodies. It’s creation stemmed from the many corporate scandals occurring at the time such as Enron and Worldcom. The creation of this act opened many channels for the government to enforce oversight into the inner practices of large corporations. The Sarbanes-Oxley Act of 2002 was the drastic change the government needed to manage and review corporate financials and reporting practices. By forcing corporations to comply with a more stringent set of regulations and allowing the government an audit and oversight board, they were allowed to positively …show more content…
Take Enron for example, in the later 1990s its stated worth was estimated to been around $70 billion dollars, but after internal review it was found that much of its debt was allocated to falsely created businesses leaving its stated assets to be significantly lower than its actual debt. The scandal was such an issue for all its investors and the government predominantly because its net value decreased radically and by December 2, 2001 the company declared bankruptcy. One of the main issues of this scandal that investigators found was that the company hired auditor, Arthur Andersen, was conspiring with the CEO and CFO to falsify the financial documentation. Had the SOX Act been implemented prior, these falsifications would have been addressed long before the company declared bankruptcy. Of the eleven sections in the SOX Act, Title III Section 802, address what constitutes as fraud and would have held the Enron and Arthur Anderson accountable for submitting proper documents. Also the SOX Act Title IV, Section 404, which states that the management of a corporation must be responsible for establishing and maintaining a system of internal control that is compliant with the Securities Exchange Act of 1934, would have required a third party double check of the corporates financial reporting which would have assisted in bringing to light the corrupt practices of creating false business and prevented a hired audit company from approving the
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1706 Words | 7 PagesCode. It is now a criminal offense to retaliate against whistle-blowers, carrying penalties from a large fine to 10 years in prison” (Kleckner, Phil and Jackson, Craig 2004). Accordingly, the Sarbanes-Oxley Act helped Robert Fulk on many levels as it was he who exposed the falsehood of business practices of UPS and their cheating the US government—one of their biggest customers. Even though Fulk found himself in a compromising position with UPS, by exposing the mask and the deep connotations of deception that was underneath the UPS corporate body, he still came out winning a victory for himself and morally and ethically individuals who believe in being fair and upstanding
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