Sarbanes Oxley Act
SARBANES-OXLEY ACT
ACCOUNTING FOR NON-ACCOUNTING MAJORS
04/22/2013
Sarbanes-Oxley Act a.k.a. “SOX” The Sarbanes-Oxley Act was enacted to establish new or enhanced standards for U.S. public company boards, management, and public accounting firms. It is also known as the “Public Company Accounting Reform and the Investor Protection Act of 2002. It was created by Senator Paul Sarbanes (D-Maryland) and US Congressman Michael Oxley (R-Ohio) and was signed into law on July 30th 2002. This has been the most dynamic securities legislations since the creation of the SEC in 1933 and 1934. The purpose of SOX is to establish new or enhanced standards for U.S. public company boards, management and public accounting firms in an effort to do away with bad accounting procedures that led to the collapse and investigations of several large corporations back in the late 1990’s to early 2000’s. (PKWY, n.d.) The public outrage that occurred as a result of the financial reporting scandals led congress to pass this Act in order to regulate audits of the public sector accounting procedures and prevent any further occurrence of false financial reports. Companies that are not using the standard accounting procedures have sometimes been led to using methods that mislead investors about the financial aspect or health of the company. Such practices have ranged from being plain unethical to illegal. (PKWY, n.d.) This led to the passing of the Sarbanes-Oxley Act of2002 in an effort to encourage executives and the Board of Directors to double check financial records as well as dissuade the intentional misrepresentation of the company financial status. (Addison-Hewitt Associates , 2013) It was also passed because the misrepresentation allowed loans from major banks to companies that would have been looked upon as risky and hurt the bank investors. (Addison-Hewitt Associates , 2013) When the misrepresented financial reports caused stockholders to make what looked like a
ACCOUNTING FOR NON-ACCOUNTING MAJORS
04/22/2013
Sarbanes-Oxley Act a.k.a. “SOX” The Sarbanes-Oxley Act was enacted to establish new or enhanced standards for U.S. public company boards, management, and public accounting firms. It is also known as the “Public Company Accounting Reform and the Investor Protection Act of 2002. It was created by Senator Paul Sarbanes (D-Maryland) and US Congressman Michael Oxley (R-Ohio) and was signed into law on July 30th 2002. This has been the most dynamic securities legislations since the creation of the SEC in 1933 and 1934. The purpose of SOX is to establish new or enhanced standards for U.S. public company boards, management and public accounting firms in an effort to do away with bad accounting procedures that led to the collapse and investigations of several large corporations back in the late 1990’s to early 2000’s. (PKWY, n.d.) The public outrage that occurred as a result of the financial reporting scandals led congress to pass this Act in order to regulate audits of the public sector accounting procedures and prevent any further occurrence of false financial reports. Companies that are not using the standard accounting procedures have sometimes been led to using methods that mislead investors about the financial aspect or health of the company. Such practices have ranged from being plain unethical to illegal. (PKWY, n.d.) This led to the passing of the Sarbanes-Oxley Act of2002 in an effort to encourage executives and the Board of Directors to double check financial records as well as dissuade the intentional misrepresentation of the company financial status. (Addison-Hewitt Associates , 2013) It was also passed because the misrepresentation allowed loans from major banks to companies that would have been looked upon as risky and hurt the bank investors. (Addison-Hewitt Associates , 2013) When the misrepresented financial reports caused stockholders to make what looked like a
References: Works Cited Addison-Hewitt Associates . (2013). The Sarbanes-Oxley Act 2002. Retrieved from Sarbanes-Oxley Act 2002: www.soxlaw/index.htm Authenticated U.S.Government Information/Conference Report. (2013). CRPT-107. Retrieved from GPO.GOV: http://www.gpo.gov/fdsys/pkg/CRPT-107hrpt610/pdf/CRPT-107hrpt610.pdf Financial-Auditing Staff. (n.d.). Fraud and Error. Retrieved from Businness Writing Servicecs: http://www.businesswritingservices.org/financial-auditing/fraud-and-error.pdf PKWY. (n.d.). Sarbanes-Oxley Act. Retrieved from PKWY.K12.mo.us: www.pkwy.k12.mo.us/west/teachers/glenn/Accounting%20