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What Prompted The Sarbanes-Oxley Act Analysis

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What Prompted the Sarbanes-Oxley Act?
The beginning of the century was marked by one of the greatest financial crises ever witnessed by the United States. The first signs of the forthcoming collapse occurred in year 2001. Before its bankruptcy in 2001, Enron, Houston, Texas was considered one of the major energy companies around the world participating in a variety of projects related to energy. Enron’s activities revolved around buying and selling gas and oil futures, building oil refineries and power plants.

Enron quickly collapsed from the pressure to produce support for its reporting. Within nine months, Enron’s stock dropped from USD80 to USD30 per share. The Securities and Exchange Commission then began looking into some of Enron’s related …show more content…

Later, the sentence was consequently overturned by the Supreme Court in May 2005. Unfortunately, it was too late as most of the professionals of the firm had already left. The termination of Andersen marked a turning point in the financial world of the United States. One of the five leading auditors in the world was officially wiped out. It was clear that a lack of professional skepticism would no longer be accepted. The dissolution of Arthur Andersen served as a wake-up call; it served as a turning point in the world of auditing.
Though Enron and Arthur Andersen were penalized, the public was not contented. The downfall of these two companies marked the greatest financial shock since the Great Depression.
Furthermore, the Enron case was not the only case of fraud leading up to SOX. Rather, Enron was seen as the drop that spilled the cup. As a matter of fact, some of the biggest financial scandals throughout the history of the US financial markets happened before the Sarbanes-Oxley Act..
Besides Enron, there were three other major scandals that took place near the issuance of SOX.
In order to please the public and ensure that a case, such as Enron, would not occur again, Congress offered and passed the Sarbanes-Oxley Act of …show more content…

The low points in this story are now household names; Enron was not the only firm in the picture, but also WorldCom, Tyco, Adelphia and many others. There was other serious misconduct as well, including in the once-celebrated IPO market, which in many occasions lacked both justice and integrity. The cost of this cut down to investors has been massive. Luckily, not the same intensity of human suffering that came with the depression of the 1930s was witnessed, however the most recent recession in the market directly affected many more investors than the 1929 market crash, because a higher number of investors had much more of their savings invested in the stock market.
The Enron scandal was sufficient to show the American public and its representatives in Congress that the market is in need of some new compliance standards for public accounting and auditing. Enron was one of the biggest and, it was thought, one of the most financially steady companies in the United States.
The numerous misconducts and crimes committed by Enron were wide-ranging and constant. Mainly damaging twisting pumped up earnings reports to shareholders, many of whom ultimately suffered devastating losses when the company collapsed. But there were many other cases of corruption and fraud, including actual embezzlement

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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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Named after its creators Senator Paul Sarbanes and Representative Michael Oxley, the Sarbanes–Oxley Act of 2002 (SOX) was enacted on July 30, 2002 by President George W. Bush. .Sox is also known as the Public Company Accounting Reform and Investor Protection Act of 2002. It is widely known as the most significant reform since the formation of the Securities and Exchange Commission of 1943. Consequently major corporate scandals such as Enron, Worldcom and Tyco led to The Sarbanes Oxley Act. The act sets strict reforms to the financial practices and corporate governance of public corporations, accounting and management firms.

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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

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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 Sarbanes Oxley Act was instituted in 2002 as result of the financial scandals at the end of 1990’s and earlier 2000’s. The act was “named after Senator Paul Sarbanes and Representative Michael Oxley” (Soxlawcom, 2015). The act contains eleven titles. Basically, the purpose of the act was to improve corporate behavior across the country and to restore investor’s confidence in the market by placing accuracy and reliability of corporate disclosure and by imposing certain restrictions and actions in the audit process. There are different opinions throughout the country regarding the efficiency of the act.

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Before the Sarbane-Oxley Act of 2002 came into effect in the American economy, most investors and shareholders were left in the dark – most often at the mercy of big corporations whose accounting practices were largely unregulated. The act was a response to the infamous scandal of Enron, WorldCom, Tyco, and Adelphia – all of whom had unethical business practices that caused their shareholders to lose the astronomical amount of investment when their scandals made headlines. The Sarbane-Oxley Act (SOX) requires a business to implement a code of ethics for its employees, especially senior financial officers; it also requires a business rotate its financial auditors on a regular basis. (Orin, 2008) The implementation of a code of ethics aims to

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The Sarbanes-Oxley Act of 2002 is a legislative response to a number of corporate scandals that sent shockwaves through the world financial markets. Some of the biggest issues involved Enron, Tyco and WorldCom. The Sarbanes-Oxley Act, commonly referred to as SOX, attempts to strengthen corporate oversight and improve internal corporate control. The main purpose of the Sarbanes-Oxley Act is to protect shareholders from fraudulent representation in corporate financial statements. Investors need to know that the financial information they rely on is truthful, and that an independent third party has verified its accuracy.

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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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The final result being the CEO was forced to step down due to unfair business

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Sarbanes-Oxley Act of 2002 (SOX) Before the establishment of SOX, there was no requirements or regulations regarding the reporting of internal controls. Prior to SOX, the only reason a company had to disclose any internal control deficiencies was if the company changed auditors, otherwise it was not required. Although, public companies did have the option to report on their effectiveness of internal controls voluntarily but very few

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Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act (SOX) legislation came into being on July 30th of 2002 and brought about major changes to corporate governance and financial practice in the United States. The Act was developed in response to a rash of corporate scandals involving companies like Enron,

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Due to the Enron scandal, there needs to be implementation of new recommendations to prevent this from happening again to other firms or companies. The introduction of the Sarbanes Oxley Act of 2002 was implemented to strengthen rules and regulations while audit procedures are being performed. To this day, all auditors follow the PCAOB which stands for the Public Company Accounting Oversight Board. The PCAOB is used to establish and maintain high quality auditing and professional practice standards for audits of public companies, issuers, and broker dealers to obtain accurate and informative information and audit reports. (cite) I agree with these standards because the implementation of the Sarbanes Oxley Act of 2002 was created to protect

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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 The Sarbanes-Oxley Act is an act that becomes handed by using the yank Congress in 2002 in a bid to protect the investors who consist of shareholder and different stakeholders from fraudulent accounting practices (Protiviti 2011). It turned into delivered to be by two main architects who're Paul Sarbanes and Michael Oxley. The Sarbanes Act majorly regulates financial practices and corporate governance.

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