Sarbanes Oxley SOX - Effective Governance Essay - 1891 Words

Sarbanes-Oxley: Effective Governance? Introduction On December 2, 2001, less than a month after it admitted accounting errors that inflated earnings by almost $600 million since 1994, the Houston-based energy trading company, Enron Corporation, filed for bankruptcy protection. With $62.8 billion in assets, it became the largest bankruptcy case in U.S. history, dwarfing Texacos filing in 1987 when it had $35.9 billion in assets. The day Enron filed for bankruptcy its stock closed at 72 cents, down from more than $75 less than a year earlier. Many employees lost their life savings and tens of thousands of investors lost billions. Who is to Blame? That is what at least a half-dozen Congressional Committees, the SEC, the U.S. Justice†¦show more content†¦Although the Act applies only to public corporations, its affects undoubtedly trickle over to the entire business and investing environment. Analysts have stated that they have seen a cascading effect, which will continue to cause many privately-owned businesses, governmental, and non-profit entities to be affected through similar regulations and requirements. Major Provisions of Sarbanes-Oxley Some of the major provisions of the Sarbanes-Oxley Act are summarized below with assistance from J. Carlton Collins, CPA, president of ASA Research, LLC. 1. Financial Records – Companies are required to maintain and retain detailed financial records. 2. Work Documentation - it is now a felony with penalties of up to 10 years to willfully fail to maintain all audit or review work papers for at least five years. The U.S. Securities and Exchange Commission will establish a rule covering the retention of audit records, and the U.S. Public Accounting Oversight Board will issue standards that compel auditors to keep other documentation for seven years. 3. Document destruction - destroying documents in a federal or bankruptcy investigation is considered a felony and can carry penalties of up to 20 years in prison. 4. Fraud discovery - the statute of limitations for the discovery of fraud is extended to two years from the date of discovery and five years after the act. Previously it was oneShow MoreRelatedThe Sarbanes Oxley Act ( Sox )1604 Words   |  7 PagesThus, to respond to the public pressure over acts of corporate offense, the Sarbanes-Oxley Act (SOX) was enacted in 2002. SOX proposed major changes to the regulation of corporate governance and financial reporting by improving the accuracy and reliability of company disclosure. This essay will explain the effects of SOX on the financial statement fraud in an organization. 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With the research I have done I believe that with the act being accepted and pass made a big change for all organizations, large and small. Keywords: U.S Congress, Organizations,Research, Sarbanes-Oxley, Accounting the Sarbanes-OxleyRead MoreThe Sarbanes-Oxley Act of 20021668 Words   |  7 PagesThe Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 The Act Impact ACC 410, Jackie Lewis, Ph.D. Abstract The Sarbanes-Oxley Act, officially named the â€Å"Public Company Accounting Reform and Investor Protection Act of 2002†, is recognized to be the most noteworthy U.S. federal disclosure and corporate governance legislation since the Securities Act of1933 (the Securities Act) and the Securities Exchange Act of 1934 (the Exchange Act). Furthermore, the provisions of the Act areRead MoreSarbanes Oxley Act1322 Words   |  6 PagesSarbanes-Oxley Act The Sarbanes-Oxley is a U.S. federal law that has generated much controversy, and involved the response to the financial scandals of some large corporations such as Enron, Tyco International, WorldCom and Peregrine Systems. These scandals brought down the public confidence in auditing and accounting firms. The law is named after Senator Paul Sarbanes Democratic Party and GOP Congressman Michael G. Oxley. It was passed by large majorities in both Congress and the Senate and coversRead MoreSarbanes Oxley Act And Its Effect On Market Liquidity1289 Words   |  6 Pagesseller (Abella, 2016). The Sarbanes Oxley Act in 2002 incentivized institutions to keep more accurate and attainable records of business. The Act being based off of the fraudulent activity of several high profile companies (eg. Enron), was put in place to better monitor and record a companies transactions, improve management style, and promote ethically responsible behavior in the workplace (Keneth, 2015). Our main purpo se is to determine whether or not the Sarbanes-Oxley Act had an affect on marketRead MoreRegulatory Compliance Controls1712 Words   |  7 Pagesï » ¿Ashbaugh-Skaife, H., Collins, D. W., Kinney, W. R., and LaFond, R. (2006, rev. 2007) The effect of SOX internal control deficiencies on firm risk and cost of equity. Retreived http://www.wbur.org/news/local/icd/icd.pdf This paper examined the cost-benefit of SOX, looking specifically at the potential for a lower cost of equity as a result of lower information risk. The findings indicate that, after controlling for other risk factors, firms with internal control deficiencies have significantly higher