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Enron's The Sarbanes-Oxley Act Of 2002

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Enron was rebranded into an energy trader and supplier by CEO and chairman, Kenneth Lay. Enron created Enron Online (EOL) in 1999, which was an electronic trading website that focused on commodities (Investopedia, 2017). This transition made Enron the counter-party to every transaction on EOL, making Enron the buyer or the seller. People were captivated by the reputation of the organization through its reputation, credit, and its expertise in the energy sector. The company was named “America’s Most Innovative Company” in the Fortune for six years straight between the years of 1996 and 2001 (Investopedia, 2017). Nearly $350 billion in trades were executed in the mid-2000 (Investopedia, 2017). The dot-com-bubble was Enron’s …show more content…

This act has closed the loopholes for public companies to defraud investors (Peregrine, 2012). This act also created a revision of the regulatory framework for the public accounting and auditing profession. The act is also used to strengthen CEOs and CFOs on the responsibility and accountability for financial disclosures and related controls as well as to increase the professionalism and engagement on corporate audits (Peregrine, 2012). The act has not prevented all situation that led to ethical financial, issues but the law has made significate changes. What this law has done, is reshaped the attitudes toward corporate governance. This law help organizations with encouraging and identifying best practices in boardrooms and has increased accountability. The Sarbanes-Oxley Act has helped with check and balance on corporate misconduct and has help decrease tolerance for ethical lapses, greater focus on corporate reputation and more intense awareness of enterprise risk (Peregrine, 2012). This act has made many tremendous changes involving changing the responsibility of management, offers harsher punishment for violators increasing maximum sentence to 25 years, for obstruction 20 years max and for mail and wire fraud to 20 years as well. The act also established the Public Company Accounting Oversight Board, which limits the conflict of interest and requires lead auditors to be rotated every five years (Peregrine,

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What Caused The Sarbanes-Oxley Act Of 2002

71 Words | 1 Pages

The financial scandals in early 2000s caused the Sarbanes-Oxley Act of 2002 to be created. Enron, WorldCom and the accounting firm, Arthur Andersen, to intentionally mislead their shareholders by exaggerating their profits and understating their expenses. The scandals had raised the importance of internal control for enhancing corporate governance. Therefore, the government established the SOX to protect the interest of the investors and employees and to monitor the companies and auditors.

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Pros And Cons Of Sarbanes-Oxley Act Of 2002

495 Words | 2 Pages

Sarbanes-Oxley Act of 2002 is a law enacted by US congress in July 30, 2002. The bill consists of 11 sections and was created as a reaction to high numbers of fraud and business misbehavior in major US corporations. The act clearly imposes responsibilities for the board of directors and defines the regulations all corporations have to comply with. The bill does not affect only US public companies, but it goes beyond that to over control companies under a US presence.

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Sarbanes Oxley Act Pros And Cons

578 Words | 3 Pages

Due to this reason many of these companies begin to expose financial fraud. The government believed that the impact of these actions was not going to be corrected by the free market economy. Therefore, the government did the necessary to impose legislation and to establish a consistent ethical standard across the country. The major changes of the act can be summarized in the first title of the act with “the creation of the Public Company Accounting Oversight Board, also known as the PCAOB”

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Compare And Contrast The Securities Exchange Act Of 1934 And Sec Rule 10b-5

749 Words | 3 Pages

By prohibiting the use of material non-public information by those in a position of trust or authority, these laws are designed to ensure that investors have access to the same information and can make informed decisions when investing in the stock market. The Sarbanes-Oxley Act was enacted in 2002 in response to a number of corporate accounting scandals that had rocked the U.S. economy. It is intended to protect investors from fraudulent activities by ensuring that publicly traded companies provide accurate and reliable financial information. Under the Sarbanes-Oxley Act, the CEO and CFO of a publicly traded company must certify the accuracy of the financial statements filed with the SEC.

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Why Is Sarbanes-Oxley Act Necessary

493 Words | 2 Pages

The rules state that “public companies must keep an internal control report so that any action taken within the business may be monitored and controlled in case any illegal action is taking place.” The corporations must also “have an outside auditor to evaluate their internal control and report them on the audit report.” The act put a new body in place to “watch over the work of auditors of public companies, called the Public Company Accounting Oversight Board, or PCAOB.” Another provision of SOX is that “accounting firms are not allowed to audit public companies or offer certain consulting services for the same client.” With SOX in place, there are penalties for anyone who violates the act’s provisions.

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Sarbanes-Oxley Act Pros And Cons

480 Words | 2 Pages

Proponents of the act argue that the law was necessary to restore public faith and prevent another outbreak of accounting frauds. On the contrary, opponents argue the law is detrimental to the economy and particularly harmful to small firms due to the high implementation cost it imposes. Given the preceding, the report examines the cost and benefits associated with the implementation of Sarbanes-Oxley Act. The report is composed of four parts: (1) Summary of SOX and its requirements (2) Costs of SOX (3) Benefits of SOX (4) Conclusions and

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Federal Safeguards: The Sarbanes-Oxley Act

943 Words | 4 Pages

Like SOX, the SEC helps protect shareholders by ensuring companies are not engaging in “accounting fraud” or “providing false or misleading information” (Securities, 2014). A third safeguard is the Whistleblower Protection Act. The Whistleblower Protection Act provides protection to individuals who find evidence of potential

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Sarbanes-Oxley Act Of 2002 Summary And Analysis

696 Words | 3 Pages

SOX was created to help investors become more confident and comfortable with their investments. SOX was established as a corporate responsibility law that is applicable to all companies documented with the Securities and Exchange Commission (SEC). The SEC’s purpose is to increase the value of financial reporting (Mundy & Owen, 2013). Additionally, SOX’s goal was to advance the reliability and accuracy of financial reporting by employing regulations and requirements regarding internal control over financial reporting. SOX consists of 11 different sections, these sections call for upper management and auditors to arrange for assurances in relation to the strategy, application, use, testing, and assessment of controls, which relates to many features of financial reporting (Mundy & Owen, 2013).

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Pros And Cons Of The Sox Act

129 Words | 1 Pages

The Sarbanes-Oxley Act also is known as the SOX act, is an act passed in 2002 by United States Congress in retaliation to the billion dollar fradulent accouunting practices, scandals, and activities of corporations. It mandates that management creates internal controls and keep accurate reports on the accuracy of controls. Moreover, the SOX act mandates that senior management attests to the legitamacy of financial reports and statements. Likewise, the adequacy of internal control systems must be authenticated and monitored by independent external auditors. Failure to comply with any provisions of the act can result in steep fines and even imprsonment.

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Sarbanes-Oxley Act Pros And Cons

562 Words | 3 Pages

The accountants for example aren't allowed on being too close or worried in a companies’ evaluation of its dangers as this could lead the accountants in becoming objectively impaired of their obligation to reach selections effectively and efficiently. The Act has also led expanded fees on the management for the reason that new strategies and techniques were involved because the common audits strategies have been scrapped off, the control for this reason do face the cost of enforcing the new guidelines. though, regardless of the high value that the control suffers, it is a blessing in hide because the Act dramatically modified the company landscape which became almost doomed. The Act mandates precise practices into regulation and this has helped in attracting traders in companies main to extended profits.

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Sarbanes-Oxley Act Essay

658 Words | 3 Pages

Running Head: THE ENRON DEBACLE AND THE IMPLEMENTATION OF THE SOX ACT 5 With today’s complex companies and impact of their leadership, the SOX Act becomes

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The Pros And Cons Of School Debt

166 Words | 1 Pages

This provision of Sarbanes-Oxley is good law. It does not represent over regulation by the government because public accounting firms should not be able to perform certain non-auditing acts for clients they also audit. The acts that audit would be done

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Enron Ethical Dilemmas

1654 Words | 7 Pages

“Enron was a pioneer; they were risk takers and treated their employees like entrepreneurs. Think big; take chances, go where no one has gone before. Unfortunately, it now looks like Enron’s profit was as volatile as the natural gas they traded” (DeLongs, 2002). This dilemma was gradual and was years in the making. The simplest summary of the dilemma was that Enron was pushing a culture of promoting rule-bending and legal loopholes to continue their economic growth and success.

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Accounting And Business Ethics: Enron's Scandal

1658 Words | 7 Pages

Enron was a Houston-based natural gas pipeline company formed by merger in 1985. By early 2001, Enron had morphed into the 7th largest U.S. Company and the largest U.S. buyer and seller of natural gas and electricity. According to New York Times (2002), Enron announced a huge third-quarter overstating in its earnings by almost $600 million over five years. The Security Exchange Commission (SEC) then began an inquiry into Enron’s accounting practices on October 22, 2001. Enron filed for bankruptcy on December 2, 2001 and left all the investors and retirees with worthless stock.

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Worldcom Case Summary

1079 Words | 5 Pages

They have produced a flood of various regulatory and legislative responses. Along with the Sarbanes-Oxley Act of 2002 and other similar regulations issued by the SEC now the New York Stock Exchange and the NASD both compel corporate CEOs and CFOs to certify the accuracy of financial statements filed with the SEC. This requires listed companies to genuinely adopt corporate governance guidelines or codes of ethics which specifically address the conduct of senior management, directors or officers. It forbids corporations to extend unnecessary credit to their directors or officers and also provides for forfeiture of profits and bonuses from sale of company stock if in case restatements have been made solely as a result of “misconduct” in financial reporting.

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