Sarbanes-Oxley Act Sarbanes-Oxley Act
Sarbanes-Oxley Act
Assignment1: Sarbanes-Oxley Act
Sieressa Woods
Professor
ACC 403: Auditing and Assurance
August 19, 2012
Assignment: 1 Sarbanes-Oxley Act Say Sarbanes-Oxley Act (SOX) to anyone who is in the field of business and they will be able to tell you a story of Enron’s fraud and that it was because of Enron fraud SOX was created. Enron case was the case where the leaders were accuse of fraud because of the $1.2 billion reduction of owners’ equity in 2001. “Enron’s founder Kenneth Lay and CEO Jeffrey Skilling were accused of misleading investors about Enron’s financial health, including artificially inflating earnings, overvaluing assets, hiding losses, and tapping reserves to meet or beat earnings forecasts” (Sanchez & Zhang, 2012, p.4). The two accused believed that there was no way for them to hold responsible for knowing every little financial transaction that occurred. This case relied heavily on the expert opinion of forensic accountants to prove whether the leader committed fraud. The defense accountants believed Enron had followed generally accepted accounting principles on disclosing earnings and losses. The accountants held the view that the officers knowing and intentional committed fraud was based on opinion and that “reasonable minds (the prosecution) could differ”. The expert accountants believe that even if the mistakes ($1.2 billion dollar mistake) was known to the public the average user will still draw to the same conclusion as if the mistakes were unknown. The prosecution auditors believed that Enron overvalued their underperforming assets, such as overvaluing a power plant by $1 billion, and that is why the company had to reduce the shareholder equity by $1.2 billion. The accountants for the defense counter this accusation by saying that some of the
Assignment1: Sarbanes-Oxley Act
Sieressa Woods
Professor
ACC 403: Auditing and Assurance
August 19, 2012
Assignment: 1 Sarbanes-Oxley Act Say Sarbanes-Oxley Act (SOX) to anyone who is in the field of business and they will be able to tell you a story of Enron’s fraud and that it was because of Enron fraud SOX was created. Enron case was the case where the leaders were accuse of fraud because of the $1.2 billion reduction of owners’ equity in 2001. “Enron’s founder Kenneth Lay and CEO Jeffrey Skilling were accused of misleading investors about Enron’s financial health, including artificially inflating earnings, overvaluing assets, hiding losses, and tapping reserves to meet or beat earnings forecasts” (Sanchez & Zhang, 2012, p.4). The two accused believed that there was no way for them to hold responsible for knowing every little financial transaction that occurred. This case relied heavily on the expert opinion of forensic accountants to prove whether the leader committed fraud. The defense accountants believed Enron had followed generally accepted accounting principles on disclosing earnings and losses. The accountants held the view that the officers knowing and intentional committed fraud was based on opinion and that “reasonable minds (the prosecution) could differ”. The expert accountants believe that even if the mistakes ($1.2 billion dollar mistake) was known to the public the average user will still draw to the same conclusion as if the mistakes were unknown. The prosecution auditors believed that Enron overvalued their underperforming assets, such as overvaluing a power plant by $1 billion, and that is why the company had to reduce the shareholder equity by $1.2 billion. The accountants for the defense counter this accusation by saying that some of the