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The Sarbanes-Oxley Act Of 2002 (SOX)

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The professional ethics become a priority in today’s business world. The improvements and regulations towards accounting ethics have been made for the last fifteen years. Since early 2000s, regulators have issued the Sarbanes-Oxley Act of 2002 (SOX), Sections 302 and 404 to oversee the financial reporting, review audit requirements, and impose sanctions for inaccurate disclosure and violation of ethical standards. Following SOX, AICPA, PCAOB, and COSO together with the Institute of Management Accountants, the American Institute of Certified Public Accountants, Financial Executives International, the Institute of Internal Auditors, and the American Accounting Association developed models and themes that guide companies on accounting ethics and …show more content…

Shafer (2002) indicates the reason of accounting wrongdoings is materiality. Moreover, the management rationally and intentionally misrepresents financial statements, misleads investors, and commits the fraud for the personal gain (pp. 243-244). The regulatory changes promoted an aggressive financial reporting. The pressure of mandatory reforms and financial markets affects CFO’s personal financial interests and interests of corporation that management can manipulate with. Beaudoin, Cianci, and Tsakumis (2015) investigate the influence of incentive conflict and earnings management ethics on financial reporting. The authors view ethics and financial incentives as keys of earnings management. The low ethical standards and personal financial targets increase the issues of CFO’s earnings management behavior (pp. 505-507). The motivations of executives and accounting managers set the ground for …show more content…

Ionescu (2009) names morality, trust, and fair expectations as the most essential values for ethical relationships with a client (p. 121). The researcher states auditors, companies, and suppliers should be committed to moral engagement with clients, stakeholders, and customers (pp. 121-123). The ethical audit should consider meeting the company-clients’ ethical objectives and account for the transparency with stakeholders. The external auditors should possess the professional judgment, integrity, and objectivity. David, Kantor, and Greenberg (1994) discuss the growing number of legal proceedings due to ethical issues. The researchers believe the implementation of ethics code will help accounting professionals maintaining the independence and great performance (p.

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According to the 2002 Sarbanes-Oxley Act court ruling of 6-3 which states, whistleblowers will have security against subcontractors, public companies, and private contractors. Any employees who reports that their company has got revenge against them for reporting alleged wrongdoing can conceivably bring legal statements against their employer. In this case Val Riviello would be protected under the Sarabanes-Oxley Act.

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The Sarbanes-Oxley (SOX), Health Insurance Portability and Accountability Act (HIPAA) and Gramm-Leach-Bliley (GLBA) acts all revolve around safeguarding or guaranteeing that information is truthful. While each act is protecting data in separate fields there are some very clear similarities. SOX requires companies to provide accurate accounting and requires a framework that can generate financial reports that are readily verifiable with traceable source data. There are three key provisions. Section 302 makes officers responsible for the accuracy of financial statements and the strength of their procedures for financial accounting.

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Another pressure presented in this case for Cendant Corporation was that for the top management once again. The top management needed to have their financial information seem profitable, therefore pressured the accountant of the company to falsify and “cook the books” to make the financial statements seem actually “profitable” when it wasn’t what It really was. As said in the previous question, income smoothing was used in this case by Cendant Corporation as an unethical practice to make the investors believe that their shares were all bright

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(Johnson , 2014 ) In this case , it shows that under normal circumstances the management level of a company or corporation will choose to hide the truth over honesty and integrity .In other way , profitability has override the important of ethics in the corporation .

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The Lehman executives and the company’s auditors Ernst and Young were the main players in this deliberate misrepresentation of the accounting information9The 10 Worst Accounting Scandals of all Times, no date). This is an indication of abuse or misuse of power among executives. The agency problem calls for more caution among corporate executives about boosting their accounts and as such it is very vital to introduce and implement business ethics among business people. According to (Grane and Matten 2004), they explain business

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