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Sarbanes-Oxley Act Essay
MEMO
TO: Cathleen Irving, ACG 1001
FROM: Mohammed Alatteyah
DATE: 05/22/16
SUBJECT: Impact of Sarbanes-Oxley Act and the Importance of Ethics in Accounting The U.S. Congress passed Sarbanes-Oxley Act in 2002 in order to reveal some financial information, define clear responsibilities of corporate boards and audit committee, and ensure their independence. SOX was formed after several major scandals in accounting field, such as WorldCom and Global Crossing. This memorandum is intended to explain the major changes in accounting practices after implementation of the Sarbanes-Oxley Act in 2002 and how ethics affected the formation of the act. Sarbanes-Oxley Act affected several areas of accounting practices that, in turn, has created more structural and secure financial procedures of a firm. First of all, implementation of the act resulted in the formation of the Public Company Accounting Oversight Board. According to the definition, provided on the U.S. Securities …show more content…
Formation of the Public Company Accounting Oversight Board as the result of the Sarbanes-Oxley Act has improved the standards of each public firm, created equalities between different companies, provided clear guidelines for audits, and established fair and ethical accounting practices. Secondly, the Sarbanes-Oxley Act requires audits to archive the financial information of publicly traded firms for five years in order to increase the security associated with financial data. SOX’s primarily objectives are to improve the protection for investors, thus the change in the length of archiving financial information provides the evidence of a firm’s financial statements. Thirdly, the Sarbanes-Oxley Act implemented criminal penalties for non-compliance, and it is assumed to be the main reason why companies and audits follow the mandates extremely
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