Sarbanes-Oxley Act of 2002 (Coursework Sample)
Sarbanes-Oxley Act of 2002
Write a paper that describes the main aspects of the regulatory environment which will protect the public from fraud within corporations, Pay particular attention to SOX requirements.
- No more than 1400 words
- Specifically evaluate whether SOX will be effective in avoiding future frauds.
- Format consistent with APA guidelines
For this assignment, you will need to do some research on the Internet and cite some sources that believe SOX has or has not been effective. You should discuss at least three views for each position. At the end of the paper, state your own opinion about whether SOX has been effective or not.
Do not summarize the Act. I will post two different summaries of the Act for your review. They are:
- United States regulators and lawmakers were very concerned that the economy would suffer if investors lost confidence in corporate accounting because of unethical financial reporting. In 2002, Congress passed the Sarbanes-Oxley Act (SOX) to reduce unethical corporate behavior and decrease the likelihood of future corporate scandals. As a result of SOX, top management must now certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. Also, SOX increased the independence of the outside auditors who review the accuracy of corporate financial statements, and increased the oversight role of boards of directors.
- Effective financial reporting depends on sound ethical behavior. To sensitize you to ethical situations and to give you practice at solving ethical dilemmas, we address ethics in a number of ways in this book: (1) A number of the Feature Stories and other parts of the text discuss the central importance of ethical behavior to financial reporting. (2) Insight boxes with an ethics perspective highlight ethics situations and issues in actual business settings. (3) At the end of the chapter, an Ethics Case simulates a business situation and asks you to put yourself in the position of a decision maker in that case.
When analyzing these various ethics cases and your own ethical experiences, you should apply the three steps outlined in Illustration below:
Solving an Ethical Dilemma
1. Recognize an ethical situation and the ethical issues involved.
Use your personal ethics to identify ethical situations and issues. Some businesses and professional organizations provide written codes of ethics for guidance in some business situations.
2. Identify and analyze the principal elements in the situation.
Identify the stakeholders—persons or groups who may be harmed or benefited. Ask the question: What are the responsibilities and obligations of the parties involved?
3. Identify the alternatives, and weigh the impact of each alternative on various stakeholders.
Select the most ethical alternative, considering all the consequences. Sometimes there will be one right answer. Other situations involve more than one right solution; these situations require you to evaluate each alternative and select the best one.source..
An increasing number of first time investors are now turning to the market for the purpose of securing their futures, finding school fees for their children, paying for their homes, meeting their daily needs and so on. This necessitates a more compelling role by the government to protect these investors and the public from fraud related activities within corporations. This concern was more apparent in the fiasco of Enron scandals, Tyco, Worldcom, Global crossing, Adelphia and others who were or have been found to practice massive fraudulent operations in their business.
In an attempt to curb such fraudulent activities incorporations, the US federal government has enacted scores of particular fraud prevention and protection acts. Some of these acts enacted recently at the federal level include the 2007 tax fraud prevention act, the 2008 Foreclosure Rescue Fraud Prevention act. At the state level, many other acts have been enacted by the respective state governments for their specific jurisdictions.
The Sarbanes--Oxley Act, also known as the SOX or the SarBox is the most modern and significant fraud prevention act in the history of America. This act was meant to put in place novel anti-fraud standards and measures for the boards of publicly listed organizations, management concerns and accounting firms in US. The act which acquired its name from its sponsor in congress, Paul Sarbanes, a U.S senator requires the board of directors in the publicly listed organizations to take on extra oversight obligations, requirement for enhanced disclosure, assigning of increased criminal penalties for offenders in fraudulent activities, and also limiting individual control. This paper evaluates whether the Sarbanes--Oxley Act has been effective in the protection of the public from fraud.
SOX has not been Effective
Owing to the much talk concerning the Scandals of Enron, Tyco, WorldCom and others, it would appear natural for organizations to work hard and be more careful in preventing fraud in their organizations. According to the views of some, the SOX has assisted very little with regard to fraud prevention. Although the Sarbanes-Oxley act is perceived by many to be the answer on fraud activities in corporations, there are those whose perceptions on its efficacy have been different. For some of these people, the impact of SOX on fraud has not been measurable.
For instance, according to Childress, (2008) the expansive rules and regulations in the SOX have only resulted into organizations having to undertake expensive paperwork. These companies are now expected to keep many documents and files with regard to what is done by the company and how it does concerning its operations and financial data. Childress argues “it is not a large or extensive documentation tha...
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