What Prompted The Sarbanes-Oxley Act Analysis

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

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

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