A Preimer On Sarbanes Oxely Essay

2137 words - 9 pages

A Primer on Sarbanes-Oxley

By Steven Williams
Activity 7
NorthCentral University

This paper identifies issues, activities and practices,in financial reporting by public companies that were sanctioned by the Sarbanes-Oxley legislation Act of 2002 (SOX). This act was passed with the intent to restore public confidence and increase transparency in financial reports of publicly held companies, due to the aftermath of the financial scandals that plagued companies such as Enron and Worldcom (Jennings, 2012). The problem to be investigated is the ethical issues that were legislated by SOX, the cost associated with the implementation of the new act on different ...view middle of the document...

The new legislation requires public accounting auditors to be independent from the operations of the company they are auditing. This requirement is not new as it is a basic requirement from all accounting firms to be independent of all activities of the corporation they are auditing. This concept of independence is the foundation of the profession of public accounting. It is based on the belief that auditors should be independent in facts and appearance in order to minimize outside pressure that may be imposed by clients who hired them. Lack of independence can impair their judgment on the accuracy of the financial statements being audited. This concept also inspires confidence in the quality of the financial statements audited by the public who have interest in them(Previts & Merino, 1998). It can be easily concluded that there is a potential conflict of interest if a work is performed and then audited by the same party. In this case, the stakeholders cannot be assured of the validity of the report. The legislation by PCAOB applicable to the auditor’s independence was not necessary if the public accounting firms and the companies involved had adhered to the auditors’ professional requirements.
The legislation with the issues of corporate responsibility, financial disclosures, and conflicts of interest in general could have been prevented if the leadership of the companies involved exercised their moral responsibility in their role as managers. Moral responsibilities include honesty, transparency, respect and fairness. It may also include factors such as excellence in the conduct of business, profitability and others.
Davis,Schoorman, &Donaldson (1997)define stewardship as a higher level of duty of governance in which the motivations of managers are based on pro-organizational rather than self-interest behavior (p.27). Ethical stewardship can be defined as a “morally established duty and a fiduciary obligation” (Caldwell, Hayes & Long, 2010, p.501). Honesty and ethical conduct include the handling of both personal and professional conflict of interest, the ability to fairly, accurately and timely report and discloseall the information that are the representation of the company one is entrusted in his or her fiduciary responsibilities. This means that thecertification and disclosure of financial statements by CEO and CFO should be their binding words as to their truthfulness of the financial condition of the company they are responsible for. Finally, an organization that wants to portray itself as trustworthy should not have boards of directors who have personal interest in its daily operation. The organization is better served if the directors are viewed as autonomous, and impartial to the one who make daily decisions. This will ensure that they have the ability to review the operation of the managers and make decisions that are independent and to the best interest of the organization.
Any organization...

Other Papers Like A Preimer on Sarbanes -Oxely

Sarbanes-Oxley Act Essay

633 words - 3 pages prevents and controls how auditing firms interact with companies. With an independent auditing firm, there was no chance of “looking past” mistakes purposely made by the company’s accountant(s) in order to show a profit [ (Sarbanes-Oxley Act, 2002) ]. The SOX required internal controls for assuring the accuracy of financial reports and disclosures. It also mandated audits and reports on these controls. The government really wanted to

None Essay

473 words - 2 pages required by Sarbanes-Oxley. Moore, Frank, Swarz, Nikki. “Keeping an Eye on Sarbanes-Oxley.” The Information Management Journal (2003): 20-23. Print. This article was written one year after the institution of the Sarbanes-Oxley Act. It starts by providing a brief summary of the purpose of the act and then dives into Section 404’s Internal Controls Rules. Since this article is geared toward IT management, its concentration on Section 404

Accounting 100

616 words - 3 pages financial statement being released by companies. The government had to step in order to stop the bleeding. Two members of the US congress had the foresight to find a solution to the problem. The solution that was implemented is known as the Sarbanes-Oxley Act of 2002 (SOX). The Sarbanes-Oxley is a piece of legislation that changed the business world forever. The Act was created in order to raise investor confidence in the marketplace. One of

Sarbanes-Oxley Act

940 words - 4 pages timeline requirements for financial reporting. Sarbanes-Oxley now clearly places responsibility on corporate executives for the content of a company's financial reports issued to investors. Executives must certify that they have reviewed the reports and that the reports contain no materially false statements or omissions. Financial reports must not be misleading; they must impart a clear and accurate portrayal of the company's financial condition

How Does the Sarbanes Oxley Act Relate to Internal Controls?

722 words - 3 pages How Does the Sarbanes Oxley Act Relate to Internal Controls? Strayer University December 3, 2010 In order to have a full understanding of what Internal Controls are and how they relate to The Sarbanes Oxley Act, I decided to do a little research on Internal Controls, first. (Horngren, Harrison, and Oliver, 2009, pp. 380-384), defines Internal Controls as an organizational plan and all the related measures adopted by an entity

Sarbanes Oxley Act

1258 words - 6 pages “Sarbanes-Oxley (SOX) Act and its impact on corporate America” In order to understand why the Sarbanes-Oxley Act came to be, it’s important to acknowledge some of the mistakes made by some companies that led to the creation of this Act. The Sarbanes-Oxley Act was originally enacted in the wake of the Enron scandal, but then pushed to congress after a series of high-profile financial scandals followed Enron, including WorldCom and Tyco that

Effect of Unethical Behavior Article Analysis

570 words - 3 pages Effect of Unethical Behavior Article Analysis ACC/291 This paper will analysis different situations that might lead to unethical practices and behavior in accounting. This paper will also examine the effects of the Sarbanes-Oxley Act of 2002 on financial statements. Accounting could be described as a type of instrument or dialectal put in order to provide information with regards to the financial position of an organization or business

Is4640 Week 1

902 words - 4 pages " prior to 2002. The intent of the SOX Act was to protect investors, and really all stakeholders in a business firm, by improving the accuracy and reliability of corporate disclosures, such as earnings reports, pursuant to securities laws and regulations. The Sarbanes-Oxley Act was signed into law on July 30, 2002. It was a regulatory reaction to the corporate scandals at Enron, WorldCom and Arthur Anderson. It created the Public Company Accounting

Sarbanes - Oxley Act

2179 words - 9 pages Sarbanes-Oxley Act of 2002 I. Introduction The Sarbanes–Oxley Act of 2002 (Pub.L. 107-204, 116 Stat. 745, enacted July 30, 2002), also known as the 'Public Company Accounting Reform and Investor Protection Act' (in the Senate) and 'Corporate and Auditing Accountability and Responsibility Act' (in the House) and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002, which set new or enhanced

Impact Of Unethical Behavior Analysis

379 words - 2 pages Impact of Unethical Behavior Analysis Unethical practices and behavior in accounting may often go unchecked because the actions may be the result of management or executives. Fear of negative reactions from management or other peers may silence a person causing them to turn a “blind eye”. Falsifying or altering business documents such as sales receipts, or tampering with reports may lead to unethical practices. According to Anonymous

Ethical Behavior in Finance Reporting

780 words - 4 pages statements are presented in a manner that does not contain inaccurate information (The Sarbanes-Oxley Act, 2006). The Sarbanes-Oxley Act has helped make a difference in the financial reporting of companies. Because of the checks-and-balances approach to companies and mandatory internal controls, this allows more ethical behavior to occur and reduces the chances of large fraud within companies. SOX mandates the reporting of information on the company’s

Related Essays

A Primer On Sarbanes Oxley Essay

2146 words - 9 pages A Primer on Sarbanes-Oxley By Doris Activity 7 MGT7019-8 NorthCentral University Abstract This paper identifies issues, activities and practices, in financial reporting by public companies that were sanctioned by the Sarbanes-Oxley legislation Act of 2002 (SOX). This act was passed with the intent to restore public confidence and increase transparency in financial reports of publicly held companies, due to the aftermath of the

Hbr Case: Give My Regrets To Wall Street?

966 words - 4 pages remain public if it is “truly creating value”, he would also understand how more value going private could create (235). For remaining public, he claims that the best way to remain public while avoiding the high costs associated with Sarbanes-Oxely would be to operate on Pink Sheets, because they do not come with the numerous regulations of the major exchanges, though he does admit that there may be “difficulty persuading [his

How To Succeed Essay

1066 words - 5 pages process because of this act, and our position on the act. In analyzing and researching these different topics we will better understand the complexity and the specific foundations of the Sarbanes Oxley Act. As stated above we will first look at how the Sarbanes Oxley Act became in existence. The Sarbanes Oxley Act was passed into legislation in 2002 because of a series of corporate scandals. Some regard the Sarbanes Oxley Act as the most

Sarbanes Oxley Outline

709 words - 3 pages The Ineffectiveness of the Sarbanes Oxley Act In Corporate Management and Accounting In the early 1990s, a young company named Enron was quickly moving up Fortune magazine’s chart of “America’s Most Innovative Company.” As the corporate world began to herald Enron as the next global leader in business, a dark secret loomed on the horizon of this great energy company. Aggressive entrepreneurs eager to push the company’s stock price higher