Acc403 Assign 1-Sarbanes Oxley
Sarbanes-Oxley Act
Student Name
Professor Name
ACC 403 – Auditing
8/19/2012
Sarbanes-Oxley Act
The Effectiveness of Regulations.
There used to be a time in the United States when there were no regulations in place to protect the public from corporate greed and deceit. Publically traded companies used the auditors they had on retainer to audit their financial statements. There was no reason to believe that such large corporations would allow their share holders to fall. That fairytale came to an end with the discovery of the Enron and WorldCom scandals. These nightmares made the public “wake up” and realize that nothing was required of these companies to prove their statements or protect their shareholders. Regulation was needed if consumer confidence was to be bolstered.
What should be done to prevent another scandal like Enron or WorldCom from happening again? Kirk Hanson, executive director of the Markkula Center for Applied Ethics states that the lack of truthfulness by management and the dual role of the Enron auditor were partly to blame for something like this happening. (Hanson, 2002) With these concerns in mind, legislation was passed in 2002 that introduced major changes to how corporations were governed and how financial practice is regulated (Addison-Hewitt Associates, 2006). The architects of the Act were Senator Paul Sarbanes and Representative Michael Oxley who along with the legislation, created deadlines for compliance. The Sarbanes-Oxley Act (SOX for short), cannot be briefly summarized so here are some highlights. All publically traded companies, large and small, are required to comply with Sarbanes-Oxley Act. The Securities and Exchange Commission oversees the compliance of publically traded companies with the Sarbanes-Oxley Act and the Public Company Accounting Oversight Board regulates the accounting firms. The Sarbanes-Oxley Act contains eleven titles but the gist of the Act states that all financial statements will be
Student Name
Professor Name
ACC 403 – Auditing
8/19/2012
Sarbanes-Oxley Act
The Effectiveness of Regulations.
There used to be a time in the United States when there were no regulations in place to protect the public from corporate greed and deceit. Publically traded companies used the auditors they had on retainer to audit their financial statements. There was no reason to believe that such large corporations would allow their share holders to fall. That fairytale came to an end with the discovery of the Enron and WorldCom scandals. These nightmares made the public “wake up” and realize that nothing was required of these companies to prove their statements or protect their shareholders. Regulation was needed if consumer confidence was to be bolstered.
What should be done to prevent another scandal like Enron or WorldCom from happening again? Kirk Hanson, executive director of the Markkula Center for Applied Ethics states that the lack of truthfulness by management and the dual role of the Enron auditor were partly to blame for something like this happening. (Hanson, 2002) With these concerns in mind, legislation was passed in 2002 that introduced major changes to how corporations were governed and how financial practice is regulated (Addison-Hewitt Associates, 2006). The architects of the Act were Senator Paul Sarbanes and Representative Michael Oxley who along with the legislation, created deadlines for compliance. The Sarbanes-Oxley Act (SOX for short), cannot be briefly summarized so here are some highlights. All publically traded companies, large and small, are required to comply with Sarbanes-Oxley Act. The Securities and Exchange Commission oversees the compliance of publically traded companies with the Sarbanes-Oxley Act and the Public Company Accounting Oversight Board regulates the accounting firms. The Sarbanes-Oxley Act contains eleven titles but the gist of the Act states that all financial statements will be
References: Addison-Hewitt Associates. SARBANES-OXLEY ACT , (2006). A guide to the sarbanes-oxley act. Retrieved from B2B Consultancy website: http://www.soxlaw.com/index.htm Arens, A., Elder, R., & Beasley, M. (2010). Auditing and assurance service: An integrated approach. (13 ed.). Upper Saddle River: New Jersey COHN, M. (2012). Congress examines 10-year legacy of sarbanes-oxley. Accounting Today, Retrieved from http://www.accountingtoday.com/news/congress-sarbanes-oxley-anniversary-63434-1.html Hanson, K. (2002, March 05). Interview by A. Nakayama [Personal Interview]. Enron. Lessons from the Enron Scandal, Santa Clara, CA., Retrieved from http://www.scu.edu/ethics/publications/ethicalperspectives/enronlessons.html