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Sox Act Memo
The purpose of this memo is to provide you with information on the Sarbanes–Oxley Act of 2002
(SOX Act) and to describe the importance of its implementation, per your request. The SOX Act
was first introduced in the house as the "Corporate and Auditing Accountability, Responsibility, and
Transparency Act of 2002" by Michael Oxley on February 14, 2002. Paul Sarbanes, a Democrat
U.S. Senator, collaborated with Mr. Oxley, a Republican US Senator, creating significant bipartisan
support. The SOX Act was enacted by the end of July 2002 in response to recent corporate
accounting scandals. The twin scandals that were impetus for the legislation involved the
corporations of Enron and WorldCom.
THE PURPOSE OF THE ACT
The main purpose of the Sarbanes ... Show more content on Helpwriting.net ...
This is because when the SOX Act was enacted it provided detailed guidelines with strict sentences
if these guidelines were not followed. David E. Hardesty, accountant and author of Corporate
Governance and Accounting Under the Sarbanes–Oxley Act of 2002, said it very well, stating "Each
place where information could be altered, either inadvertently or on purpose, Sarbanes–Oxley
attempts to fix it. These problems were created by people who were willing to take the risk that they
could cook the books and get away with it. In today's environment, the feeling is that if we cook the
books, we might get caught." The following chart shows how since the SOX Act has been
implemented there has been a reduction in lawsuits.
According to the research by Cornerstone Research in 2007, they found that some legal experts
credit the SOX Act and tougher enforcement to the drop in lawsuits which they believe is a positive
effect of less fraud. According to the study, the number of lawsuits dropped from about two–
hundred–twenty–five in 2002 to about sixty lawsuits in 2007. These are astonishing numbers yet
prove that there have been excellent results from the implementation of the SOX
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Acct 504 Case Study 2
Internal Control Report For LJB Company Table of Contents Introduction 3 IPO and Internal
Controls 3 Successful Existing Internal Controls 4 Internal Controls for Consideration 4 Conclusion
5 Bibliography 6 Introduction Internal controls are vital to any company's business and financial
sustainability. Internal controls consist of measures taken by a company safeguarding against fraud,
and theft. Internal controls ensure accuracy and reliability in accounting data, and secure policies
within the organization. Further, internal controls evaluate all levels of performance. These are
addressed with five principles ... Show more content on Helpwriting.net ...
However, one person acting as accountant, treasurer and controller places an imbalanced access to
the companies invoice process, ordering process, check cashing process, and he alone decides what
of these activities gets recorded in the Company books. We recommend that two other employees be
assigned the respective Treasurer and Controller duties. Establishment of responsibilities must be
outlined and assigned. At this point there is concern over the accountant being solely responsible for
the ordering of supplies, and paying for supplies. There are no current controls in place to ascertain
what supplies are being ordered and paid for against supplies that are actually received. One
employee needs to be assigned the job of ordering supplies and creating a purchase order. The
accountant can check the invoice received by the supply company against the purchase order and
then pay for the supplies. Several physical controls should be immediately executed for LJB
Companies. Restrictions need to be in place on the petty cash fund, adequate documentation for use
of petty cash funds must be implemented. The purchase of the indelible ink check printing machine
should reduce the need for petty cash access. Password protection on all computers should be
required, with an identification and unique password for each employee. Restrictions of access to
pornographic websites
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Essay on Overview of the Sarbanes-Oxley Act (SOX)
The Sarbanes–Oxley Act, frequently known as the SOX. The act was passed on in 2002 as a federal
United States law. The law was drafted in response to the numerous numbers of financial scandals
performed by high profile corporations such as Johnson & Johnson. The action has created a new
company standard of responsibility in order to protect the valued stakeholders, as well as the public,
from the deceitful practices of various organizations. The Sarbanes–Oxley Act ... Show more
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As a result of authorizing the Sarbanes Oxley necessities for the non profits healthcare firms, fraud
connected matters can be decreased. In addition to this it can as well be advantageous for those
increasing the business supremacy of the not for profit hospitals. Completion of a number of SOX
segments like for instance changing the lead review partners, setting up a review committee together
with pre approving non review fees would be obliging for the non profit healthcare businesses in
rising of the corporate governance (Act, 2002). Other additional SOX facts state: The legislation
acquires its name from the authors who is Senator Paul Sarbanes along with the Representative
Michael Oxley The Senate election: 99–0 The Act holds 11 designate sections The Public Company
Accounting Oversight Board ( PCAOB ), which was created to regulate, direct, and discipline firms
in regards to their fulfillment to this law. The conditions of Sarbanes Oxley have always been
effective in regulating the principled behavior of the for profit health care businesses. It is for the
reason that as SOX have need of growth of a system of principles, it gives confidence to the
employee in order to report any form of immoral and deceitful behavior without the fear of revenge.
in addition, when following the SOX provisions , for the profit making healthcare
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Essay on The Sarbanes-Oxley Act
There are so many organizations today that are using the Sarbanes–Oxley (SOX) legislation that
helps to safeguard their company and their financial records. The Sarbanes–Oxley act began in 2002
and the purpose behind this act was to protect organizations, it had a major impact on accounting
and record keeping. Because of Enron, they passed this act for publicly–traded corporations to better
implement control to their enterprise data. "Named after Senator Paul Sarbanes and Representative
Michael Oxley, who also set a number of deadlines for compliance" (SOX Law ). "The Sarbanes–
Oxley Act is arranged into eleven titles, but the most important sections within these are often
considered to be 302, 401, 404, 409, 802 and 906" (SOX Law ). The ... Show more content on
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This is the type of service that IBM is offering to their customers, and being SOX compliant.
"Section 404 mandates that company provide an annual report on internal controls, attested to by an
external audit firm" (IBM). While IBM is offering these services there are other companies that are
doing the same service too.
Protiviti an independent global risk and internal audit advisory firm, surveys client attitudes about
the costs, and the benefits, of compliance with the law. Protiviti in many cases is helping to manage
document controls, to perform tests, and develop an option of the internal controls that the external
auditors rely on. According to this company they believe that "Companies with weak or non–
existent internal controls over financial reporting are more susceptible to fraud and those frauds will
take longer to uncover" (McKenna, 2011). They have reported that a lot of companies spend
between $100,000 and 1,000,000,000 on compliance activities; this depends on the size of the
company. About 50 percent of companies do most of their SOX work internally within the company.
Within the corporation, Protivite address the smaller companies in three areas where their internal
control compliance. Companies will find that they are behind in IT general controls, spreadsheet
controls, and segregation of duties. They are doing what they can to help in these areas.
To conclude, the Sarbanes–Oxley act
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Sarbanes Oxley Outline
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 and a series of fraudulent accounting procedures involving special purpose
entities were about to be exposed. In early 2002, the United States Justice Department announced its
intent to pursue a criminal investigation into the once mighty company, Enron. After the gross
negligence of accounting ... Show more content on Helpwriting.net ...
Passing of Sarbanes by Congress to limit corporate accounting violations. (Sarbanes Oxley Act of
2002)
2. The creation of the Public Company Accounting Oversight Board and its controversial creation. a.
The mandatory registration of public accounting firms who prepare audits for public companies. b.
The extensive rules given to accounting firms under §103 of Sarbanes Oxley and the complexity of
their application. c. How public accounting firms are unable to handle increased auditing and
accounting demands by public companies.
3. Increase in expenses for businesses to achieve compliance with Sarbanes standards. a. Inaccurate
calculations made by Congress minimizing the costs associated with Sarbanes compliance. (Feeney,
T., The Heritage Lectures; No. 995) b. Businesses struggle with the cost of accounting department
upgrades for internal audit procedures due to lack of funds. c. The slow destruction of the U.S.
economy where companies find more benefits of going public in overseas markets or selling to
private equity firms.
4. The controversy surrounding Sarbanes §404 and its application to corporate accounting. (In re
Buca Inc. Secs. Litig, 2006) a. The ambiguity Sarbanes §404 presents for corporate management
and the relationship of external auditors. (In re Cardinal Health, Inc. Sec. Litigs., 2006) b. The
inability for accounting firms to interpret and apply Sarbanes §404 clearly for publicly held
corporations.
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Sarbanes-Oxley Act Advantages And Disadvantages
THE TAX ADVANTAGES OF DISADVANTAGES OF SARBANES–OXLEY
Name
Institution
Date
The Tax Advantages and Disadvantages of Sarbanes–Oxley The Sarbanes–Oxley is an Act passed
by the U.S congress in the year 2002. Its main aim was to protect investors from exposure to
fraudulent activities through accounting activities by United States corporations. Due to the increase
in fraudulent activities by large corporationssuch as Enron Corporation at the turn of the
21stcentury, the United States congress passed the Act. However, this essay would identify the pros
and cons associated with this Act. The Sarbanes–Oxley Act takes into account recent cases such as
the multibillion fraudulent cases such as the Enron scandal that led to the fall of the ... Show more
content on Helpwriting.net ...
(2009). The Economic Benefits of the Sarbanes–Oxley Act? Evidence from a Natural Experiment
(1st Ed.). Boston. Retrieved from http://fic.wharton.upenn.edu/fic/papers/09/0941.pdf
Clark, K. (2012). The Effects of Sarbanes Oxley on Current Financial Reporting Standards (1st Ed.).
Retrieved from http://digitalcommons.liberty.edu/cgi/viewcontent.cgi?article=1303&context=honors
Green, S. (2004). A Look at the Causes, Impact and Future of the Sarbanes–Oxeley Act (1st Ed.).
Retrieved from http://scholarlycommons.law.hofstra.edu/cgi/viewcontent.cgi?
article=1024&context=jibl
Grinberg, E. (2002). The Impact of Sarbanes Oxeley Act 2002 on small firms (1st Ed.). Retrieved
from http://digitalcommons.pace.edu/cgi/viewcontent.cgi?
article=1055&context=honorscollege_theses
Hopkins, B. (2016). The Successes and Shortfalls of the Sarbanes –Oxley Act of 2002 (1st Ed.).
Retrieved from http://collected.jcu.edu/cgi/viewcontent.cgi?article=1098&context=honorspapers
Jahmani, Y. (2016). Pros and Cons of Sarbanes– Oxeley Act (1st Ed.). Retrieved from
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Sarbanes-Oxley Act Research Paper
Sarbanes–Oxley Act of 2002
Karla Azcue
ACC 120–09
Mr. Donald Senior
The Sarbanes–Oxley Act of 2002 is one of the most important legislations passed in the 21st century
effecting financial practice and corporate governance. This act was passed on July 30, 2002 thanks
to Representative Michael Oxley a republican from Ohio and Senator Paul Sarbanes a democrat
from Maryland. They both passed two different bills that pertain to the same problem which had to
do with corporation's auditing accountability and financial fraud problems within corporations. One
was bill (S. 2673) brought by Senator Sarbanes and the other bill (H. R. 3763) brought by
Representative Oxley. Both bills where passed separately one by the house and the other by the ...
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• Employee protections allowing those corporate fraud whistleblowers who file complaints with
OSHA within 90 days to win reinstatement, back pay and benefits, compensatory damages,
abatement orders, and reasonable attorney fees and costs.
Furthermore, according to soxlaw.com an online guide to the Sarbanes–Oxley Act the major
compliances to the act rest on 5 sections:
• The first one is the Sarbanes–Oxley section 302, which is found under Title III of the act,
pertaining 'Corporate Responsibility for Financial Reports'.
This section asks for sporadic legal financial reports to include
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Sarbanes-Oxley Act Pros And Cons
The year 2002 marked a critical time for many corporate businesses as it was known for one of the
most infamous years in organizational scandal. The Enron debacle, Tyco, Adelphia, and WorldCom
all were involved in some sort of corruption. These corporations misfortunate mishaps was the
driving force for the implementation of ethical laws. One law in particular was the Sarbanes–Oxley
Act (SOX). This law was enacted to help restore integrity and public confidence to the financial
markets (Orin, R. 2008). The Sarbanes–Oxley Act is not a law that is new to the scene of corporate
America, in fact in 1934 the Securities and Exchange Commission was introduced to help police the
U.S. financial markets. As a result,
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Sarbanes-Oxley Act (SOX) Essays
Introduction
In July of 2002, Congress swiftly passed the Public Company Accounting Reform and Investors
Protection Act at the time when corporations like Arthur Anderson, Enron and WorldCom fell due to
fraudulent accounting practices and bad internal control. This bill, sponsored by Mike Oxley (R–
OH) and Paul Sarbanes (D–MD), became known as Sarbanes–Oxley Act (SOX).It sought to restore
public confidence in publicly traded companies and their accounting practices, though the
companies listed above were prosecuted on laws that were already in place before SOX. Many
studies have examined the effects of SOX on corporations in the past eleven years. The benefits are
hard to quantify and the cost are rather hard to estimate including the ... Show more content on
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In terms of increasing independent directors in corporate governance, SOX directed the Securities
and Exchange Commission (SEC) to adopt rules that prohibit listings of companies that did not have
an audit committee. The audit committee must consist of independent directors, and if the
committee is in place but did not have enough independent directors, it must add more independent
directors to the board. In addition, at least one of the directors must be a financial expert as defined
by the SEC.
As for the liability of officers and directors, SOX expanded the scope of their legal obligation by
increasing penalties for violating securities law and creating new crimes for certain acts which
included securities fraud, obstruction of justice, and false certification of financial statements. This
part of the SOX act actually modified the current laws that had been in place by increasing the
penalties associated with civil and criminal violation of securities law. It also requires that all
compensation in terms of bonus or incentive–based compensation and profit that is earned by
executive officers be returned to the company if these laws are violated.
To increase the disclosure requirement of publicly traded firms, the SEC requires that firms with a
market value of $75 million or have to include a management assessment on the effectiveness of
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Section 404 Sarbanes Oxley
The Limitations of Section 404 of the Sarbanes–Oxley Act
Darren Abraham MSAF 670
University of Maryland University College
The Sarbanes–Oxley Act (SOX) is a legislation enacted in 2002 under the sponsorship of U.S.
Senator Paul Sarbanes (D–MD) and U.S. Representative Michael G. Oxley (R–OH). The law
introduced increased government oversight for publicly held companies. It also imposes additional
management responsibilities and corporate operating costs on companies trading under SEC
regulations. Sarbanes–Oxley was enacted in direct response to a number of corporate accounting
scandals, including those of Enron, Tyco International, and WorldCom.
As a result of the SOX Act, Corporate Managers (CEOs, CFOs) are ... Show more content on
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Unfortunately, all those efforts have not been vindicated because of the following reasons:
Accounting did not cause the recent corporate scandals such as Enron and WorldCom. Unreliable
financial statements were the results of management decisions, fraudulent or otherwise. To blame
management's misdeeds on fraudulent financial statements casts accountants as the scapegoats and
misses the real issue. Reliable financial reports rely to a certain extent on effective internal controls,
but effective internal controls rely to a large extent on a reliable management system coupled with
strong corporate governance. when management deliberately or even unlawfully manipulates
business processes in order to achieve desirable financial goals and present untruthful financial
reports to the public, accounting systems are abused and victims rather than perpetrators.
An effective system of internal control must be built on the basis of the analysis of enterprise–wide
risks. Therefore, to create value for its customers and other stakeholders, an organization must have
in place the ability to systematically assess and analyze all material risks that affect the entity's
planned objectives. (Integrated Framework, Volume II Guidance, June 2008). Internal control of the
accounting process is designed to detect unintentional data errors rather than intentional errors.
Garbage in, garbage out! Even good accounting systems can not catch
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Essay on Case Study 2
Case Study Two
Name
Accounting and Finance
02Feb2011
Dear President of LJB Company,
(1) If the LJB Company should decide to become a publicly traded company, a few internal controls
should be implemented to comply with the Sarbanes–Oxley Act (SOX). * Management will need to
provide periodic quarterly reports to evaluate the effectiveness and reliability of LJB's internal
controls over financial reporting procedures. * Management should certify the accuracy and fairness
of presentation of their financial statements. * Independent auditor(s) outside of LJB will need to
attest to management's assessment of said internal controls. Additionally, non–audit services
between these two parties (LJB and said independent auditor) ... Show more content on
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I recommend that these checks remain physically secured at all times (by the accountant, or by
delaying delivery to the accountant until he reaches his office). * Due to the unorthodox honor
system of dealing with petty cash, any single employee can withdraw a substantial amount of petty
cash in relative anonymity. This violates two Internal Control Principles: Physical Control and
Establishment of Responsibility. It violates the Physical Control Principle because the petty cash is
easily accessible with no form of physical protection of theft, and it violates the Establishment of
Responsibility Principle because no single person is in charge of the Petty Cash Fund (rather
everyone is). This can be remedied by assigning a custodian to be responsible for the fund, as well
as creating a secure area to store said funds. * These previous points additionally bring up another
weakness, though not actually part of the Internal Control Principles. Though it seems to be LJB's
unofficial policy to trust long–term employees, when a desirable opportunity to commit fraud/theft
arises, it becomes at the discretion of the employee to commit these acts for their personal benefit. *
Another weakness is LJB's lack of individual passwords which allows personnel to anonymously
use the company computers and databases. This lack of individual accountability will prevent most
attempts to track suspicious employee activities on company
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Ljb Company Essay
LJB Company: Internal Controls LJB Company: Internal Controls Contents Introduction 3 Internal
Control Requirements 2 Strengths and Recommendations 2 Violations 3 Conclusion 4 Works Cited
4 Introduction LJB Company has asked the accounting firm to evaluate their system of internal
controls because of the plan to go public in the near future. The president wants to be aware of any
new regulations required of his company if they go public. The current system of internal controls
was explained to the accounting firm. Under SOX Sarbanes–Oxley Act of 2002, all public traded
U.S. corporations are required to maintain a sufficient system of internal controls. In order for this to
be implemented all Corporate Executives and ... Show more content on Helpwriting.net ...
One thing that the company may face is fraud and in order to reduce fraud, management has to
create and build policies to address those specific risks. Strengths and Recommendations Since LJB
Company is relatively small, they have an advantage over their competitors who are large
companies. Being a small company due to its size of employees, one of the things they are doing
right is being able to set expectations and implement those within the organization. As a smaller
company, the accountant's decision to switch to pre–numbered invoices and the purchase of an
indelible ink machine was a good idea and investment. The pre–numbered invoices will prevent
transactions from being recorded multiple times. With the internal control system this will require
that the employees forward their source documents for the accounting entries. The indelible ink
machine will help organize all of the accounting duties. We recommended that LJB Company
purchase an indelible ink machine to print all employees and cut checks. With the indelible ink
machine this will make it difficult for unauthorized users to endorse checks and be approved. This
will cut down on fraud and theft within the company. Violations LJB Company is very susceptible to
fraud due the weaknesses and threats presented in the day to day operations. The type of threats
include: no human resource control, lack of cash control, and no duties defined for each individual.
LJB Company is lacking
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Sarbanes Oxley Act Of 2002 (SOX)
The Sarbanes Oxley act of 2002(SOX), also known as the public company accounting reform and
investor protection act was enacted as a reaction to a number of major corporate and accounting
scandals. These scandals occurred in Enron Corporation, WorldCom, Tyco International, Adelphia
and Peregrine Systems. These companies and corporations were looking very financial sound and
very attractive to investors. However the investors did not know that the success of these companies
were cause by false reports and artificial profits. Which cost investors billions of dollars when their
share prices of affected companies collapsed. Also inadequate accounting practices, bankruptcies,
accounting irregularities and inefficient audit were part of these frauds ... Show more content on
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At the same time it provides certain protection for whistle–blowers. Title nine of sox is named
"White Collar Crime Penalty Enhancement act of 2002." The White Collar Crime Penalty
enhancement act of 2002 has a great significance because increases the criminal penalties associated
with white–collar crimes and conspiracies. Collar crimes are various types of frauds and the most
common are securities fraud, embezzlement, tax evasion and money laundering. Conspiracies are an
agreement between people to commit any unlawful act. This means that they know the plan, and
intend to break the law. I think this title is crucial because criminal punishment is implemented for
those corporate officers who fail to certify corporate financial
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Sarbanes Oxley Act
Sarbanes–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 covers and sets new performance standards for boards of directors and managers of companies
and accounting mechanisms of all publicly traded companies in America. It also introduces criminal
liability for the board of directors and a requirement by ... Show more content on Helpwriting.net ...
There is much more of an emphasis on training and certification of auditors to understand and be
able to design processes that are in adherence to the SOX requirements (Michelman, Waldrup, 32,
33). These changes in accounting processes are just the beginning of the much broader and much
more pervasive changes at the fundamental business level within companies. The changes required
by SOX also force entirely new approaches to managing, reporting, sorting, and accessing financial
information, often requiring new IT systems and processes as well. The coordination of IT systems
and processes, accounting and reporting, and the definition of entirely new business processes are all
happening at the same time in many publicly–held companies in the U.S. through even 2009. The
exponential growth of Indian outsourcing companies who have expertise in Business Process
Management (BPM) have correspondingly seen an increase in their business, as many smaller
American publicly–held companies do not have the people or the expertise to get their processes,
systems, IT plans and accounting and reporting functions in compliance with the SOX standard in
any meaningful period of time (Radtke, et.al.) As a result, many accounting professionals also must
manage outsourcing contracts with companies who specialize in BPM and SOX
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Sarbanes-Oxley Act Summary
The Sarbanes–Oxley Act was conceived by Senator Paul Sarbanes and Congressman Michael Oxley
and signed into legislation by George W. Bush in 2002. The 11 titled Act became necessary when
investors lost their confidence in days following the Enron, Arthur Anderson, and WorldCom
fiascos. The purpose of the law is to provide board members, executives, auditors, attorneys, and
directors with specific written duties and penalties for noncompliance and "to protect investors by
improving the accuracy and reliability of corporate disclosures made pursuant to the securities
laws," as stated by the Act. The SOX has become known to many as the greatest security law since
the Security Exchange Commission was formed in 1934.
Title I consist of nine sections ... Show more content on Helpwriting.net ...
This title consists of 9 sections that instruct in the behavior of auditing firms and establish guidelines
for external auditor independence. It also sets restrictions for clients outside of auditing boundaries
and requirements for audit partner rotation.
Title III is Corporate Responsibilities. These eight sections state the financial and accounting
responsibilities of public companies. They also issue that senior executives are held responsible for
the completeness and accuracy for financial documents. Requirements for audit committees and
limits and penalties for corporate officers are also included in the title.
Nine sections of Enhanced Financial Disclosures make up title IV. These sections discuss the
requirements for stock transactions, off–balance sheet transactions, enhanced reporting, and
relationships with "unconsolidated entities. It requires audits and reports on all financial records and
also sets internal control standards in relation to completeness and correctness of those documents.
Title V consist of a section titled Analyst Conflicts of Interest. This title's purpose is to restore
investor's confidence. This is done by setting rules and guidelines for the National Securities
Exchanges and security
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Sarbanes-Oxley Act Analysis
Sarbanes–Oxley Act 2002 With the fall of Enron, WorldCom, and several other major corporations
in the late 1990's, the need for transparency and accountability in accounting was brought to the
forefront for investor's and board member's alike. Paul Sarbanes, a former senator from Maryland,
and Mike Oxley, a former member of the House of Representatives from Ohio, together created
what is now known as the most important legislation since the 1930's (Litvak, 2014). This bill, also
known as the Public Company Accounting Reform and Investor Protection Act, changed the way
companies that offer public securities did business. No longer would a publicly offered company get
to create and govern its internal controls; they would now be regulated by ... Show more content on
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Many venture capitalistic companies did not or financially could not comply with the new
regulations and requirements provided for in the act, so they took their companies to the private
sector, no longer offering shares on the public exchange (Ecer & Kahlid, 2013). The main
disadvantage to companies regarding SOX is Section 404, the internal controls portion of the act.
The major complaint– the requirements of section 404 are "new, radical and ill–considered" (Gupta,
Weirich, & Turner, 2012). The internal controls section requires companies to report on their internal
control structure and procedures for financial reporting through annual audits, which for small
companies is very costly. However, in 2010, the Dodd–Frank Wall Street Reform and Consumer
Protection Act allowed for the permanent exemption of issuers with a market value of less than $75
million from the Section 404 of the SOX negating this disadvantage, at least for these non–
accelerated firms. The additional time needed to implement the requirements of SOX caused issues
as well, impacting those small firms the hardest. In addition, investors of foreign companies were
not happy with the new regulations of SOX and an estimated loss of five to ten percent of market
capital occurred (Litvak,
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The Sarbanes-Oxley Act (SOX) Act
Introduction: "... The era of low standards and false profits is over; no boardroom in America is
above or beyond the law." (Bumiller) By way of landslide votes in both the U.S. House of
Representatives and the U.S. Senate, in July of 2002, the Sarbanes–Oxley (SOX) act was approved.
To understand the cause and effect of this landmark legislation, the SOX act warrants exploration of
the events leading to its creation, the details of the act itself, and the impacts on responsibilities to
both firms' management teams and their auditors. While the implementation of Sarbanes–Oxley has
been positive for investors, company managers and auditors, specifically, are bearing the burden of
complying with SOX through significantly greater responsibilities. ... Show more content on
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Andersen's reputation was so tarnished from the revelations of the conspiracy that no public
company would have Arthur Andersen as an auditor. Andersen's practice was disbanded and has
now become defunct with only a handful of employees still working for the firm as they continue to
wind down the business. In July of 2002, not long after the exposure of the Enron accounting fraud
and bankruptcy, WorldCom Inc. filed for Chapter 11 bankruptcy protection. WorldCom Inc.
admitted that the company had fraudulently misclassified over $3.8 billion in payments for line
costs as capital expenditures rather than current expenses (Beresford). The company's executives
perpetrated this fraud, grossly overstating revenues by improperly transferring billions of dollars in
line cost expenses to asset accounts over a number of years. These transfers reduced WorldCom's
reported line costs and increased pre–tax income by $7 billion overall (Beresford). These two
disgraceful accounting frauds by senior and executive managers at Enron and WorldCom, as well as
similar events that took place at other public companies in the early to mid–2000s and the Arthur
Andersen conspiracy were the genesis for the call of accounting reforms and auditor independence
that would ultimately become the
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Essay about Details of the Sarbanes Oxley Act 2002
An auditor's role in an audit is very important. An auditor must be able to collect enough evidence to
supports their finding, and also be on the lookout for fraud. Company's may or may not know the
law, but it is the job to know the law, and be able to educate and report findings properly. Since the
Sarbanes–Oxley Act, there have been provisions that have directly affected auditors. This paper will
include the details of the Sarbanes–Oxley Act, how ethics and independence have affected auditors,
as well implementation of new standards based on the Sarbanes–Oxley Act. The Sarbanes–Oxley
Act of 2002, provided changes in the regulations of the issuers in the public structures in the United
States, as well as non–United States issuers. ... Show more content on Helpwriting.net ...
Foreign private issuers must maintain internal control over financial reporting, and they must
evaluate the effectiveness and changes of the internal control at the end of the company's fiscal year
that may affect the financial reporting. The main goal of the Sarbanes–Oxley Act is to increase
oversight over financial reporting and financial control (Cohen & Broadsky 2004). Ethics are a
major issue which is a reason why the Sarbanes–Oxley Act was implemented. Before the Act, firms
focused on growth but not as much on professional values. Revenue was the driving factor in
auditing firms, and auditors were required to find new clients, keep existing clients, and cross
selling. There were also penalties for not obtaining these requirements which could lead to
termination (Jones III & Norman 2006). Since the Act many organizations have now implemented a
code of conduct (ethics) which sets standards of how an auditor is supposed to act or a place to go to
seek advice on handling different situations. The code of conduct or ethics can be viewed as a way
an organization wants one to act or behave (Canary & Jennings 2007). Since implementation ethics
is being taught more in college classes, and the reason for this is because of the huge scandals that
have occurred. One study showed that the key leadership roles in a company often have a MBA, so
teaching ethics will reach those leaders, and possibly prevent future ethical dilemmas (Sulivan, D.
2010).
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Sarbanes-Oxley Act Essay
THE LAW AND ITS HISTORY
What is The Sarbanes–Oxley Act? "With more than half of all American households invested in U.S.
public companies, the discoveries of financial reporting and auditing improprieties at Enron and
numerous other public companies beginning five years ago swelled in 2002 to a national crisis in
confidence in the integrity and reliability of public companies' financial statements and of external
audits." This act of 2002 is a legislation passed by the U.S. Congress to guard shareholders and the
general public against accounting errors and fraudulent practices in the enterprise, as well as
improve the accuracy of corporate disclosures. SOX defines individual accountability and requires
employees to construct an investigation of a business or person before signing a ... Show more
content on Helpwriting.net ...
Prior to the scandals, in addition to the unforeseen growth in household participation in the financial
markets, there was a growing interest in equity markets globally. Then, of course, the Enron and
other scandals revealed accounting failures by public companies and tainted the auditing profession
– which investors understandably had thought was acting as their watchdog in attesting to the
accuracy of the financial reports.
Following the failure of Enron in December 2001, in the wake of accounting scandals at major
corporations Adelphia, Peregrine Systems and others, Congress proposed legislation to reform the
governance of public companies to make boards of directors, CEOs and chief CFOs accountable for
corporate misconduct, according to Wikipedia. Sarbanes–Oxley makes employees at public
companies individually responsible for providing true and accurate information about companies'
financial statuses and practicing due diligence to secure proprietary information on investors,
customers, and
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The Purpose of Internal Controls in the Accounting Process...
Internal control is the specific procedures used within a company to safeguard its assets from
employee theft, robbery, and unauthorized use and enhanc the accuracy and reliability of its
accounting records by making fewer mistakes (Weygandt, Kimmel, and Kieso, 2008). There are six
principles that are used throughout the industry as standards for such control. They are:
1. Establishment of responsibility
2. Segregation of duties
3. Documentation procedures
4. Physical, mechanical, and electronic controls
5. Independent, internal verification
6. Other controls
The first of these controls, establishment of responsibility, is the assignment of responsibility to
certain employees. It has been found that "control is most effective when ... Show more content on
Helpwriting.net ...
Independent, internal verification is basically audits within the same store, department, shipping
dock, etc. Another person should verify that the information, money, or items that are reflected on
the sales log, inventory sheet, or shipping manifest is accurate. It should be done at an unexpected
time.
There are some other forms of internal control that most companies use today that are somewhat
effective. Bonding is a way to weed out employees who have wrong motives. Insurance companies
insure employees who deal with cash for the purpose of protecting their asset. If a person has a
criminal background for theft, this could be a red flag that the ability to steal from the company is a
high ratio. An insurance company can say yes, but the employee knows that they will be prosecuted
if they steal; and this can cause the employee to rethink that decision.
Another way to safeguard a company's is by allowing employees to learn different areas of the
company so that they are not able to develop a rhythm to devise a plan of theft. And, background
checks are helpful in lessening the possibility of employee theft. Background checks provide lots of
information on a person a company interviews. Use the information to make sound decisions on
each person individually. Is there the possibility that this person would steal from the company? If
the background check shows multiple arrests for
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Analysis of Two Themes: The Sarbanes Oxley Act and Telework
1) Sarbanes–Oxley
The Sarbanes–Oxley act was enacted in 2002 as a United States federal law that changed the
regulations and procedures of management and public accounting firms, and all U.S. public
company boards. The act was created in response to the major scandals in corporate and accounting
corporations. Sarbanes–Oxley over the years has implemented new sections and regulations. The act
specifically requires that the management of public companies assess the effectiveness of the
internal controls to ensure that it will not affect financial reporting (Kravitz, 2012). Section 404 of
the Sarbanes–Oxley Act specifically requires "a publicly–held company's auditor to attest to, and
report on, management's assessment of its internal controls". (Kravitz, 2012) This has helped many
publicly companies (especially small ones) to improve their financial reporting and transparency.
The Section 404 of the Sarbanes–Oxley Act brought about improvement and protection in
companies at high cost; impacting mainly the smaller companies. Due to this, the Dodd Frank Act of
2010 granted some companies an exemption from Section 404 if they had less than $75 million in
market capitalization (Amato, 2012 p.1–2). Dodd–Frank required the SEC to reevaluate the terms of
Section 404 in two ways such as: Requiring the SEC to conduct a study on the burden caused by
Section 404 compliance for companies with a market capitalization between $75 million and $250
million. And also required the SEC to
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Sarbanes Oxley
Financial scandals have impacted many individuals such as public companies and accounting firms.
Sarbanes Oxley has made many changes to many companies. The major financial scandals have
impacted many investors and required more regulations to avert this problems. Sarbanes Oxley has
tried to increase ethics in the upper management in many public companies. The upper management
has tried to improve on social responsibility and increase the public view. There are many critics to
Sarbanes Oxley and many different suggestions on improvements.
History of Sarbanes–Oxley Act
Scandals of many forms shape regulations in many aspects. The Sarbanes Oxley Act was a new
regulation that was initiated because of financial scandals. Tyco, ... Show more content on
Helpwriting.net ...
Social Responsibilities
Corporate social responsibility is an organizations' impact on society that goes beyond what is
ethical. Being socially responsibility, an individual in upper management must realize how the
actions might be able to influence the rest of the environment. If a company is socially responsible
the company is honest, trustworthy, and display integrity while dealing with others and provides the
attention to the stakeholders, build a community by searching for goals that are compatible with and
respect individuals and accomplish silent triumphs.
Some chief executive officers and chief financial officers had established policies in order to
determine the corporate social responsibility by affecting the local community. Some individuals
believe the corporate social responsibility can improve profits because it can promote respect for the
company in the marketplace resulting in higher sales. A company can have corporate social
responsibility in many manners such as treatment of employees, local community and increase
ethical behavior within the company. If the upper management provides ethical behavior and is
demonstrating to the employees and consumers it is a corporate social responsibility that is the most
important.
By respecting the Sarbanes–Oxley Act, the managers show the employees and the local community
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Ljb Company Case
External Consultation to LJB Company
EXTERNAL CONSULTATION TO LJB COMPANY
Abstract
A paper presented on the case study 2 review of LJB Company. The paper will address growing
issues of Sarbanes–Oxley compliance, and business ethics in regards to Corporate Social
Responsibility (CSR) and adherence to current regulatory federal mandates. Paper presents tools for
consideration for tomorrow's leaders and gives a general overview of internal control strategies
corporations take to limit legal responsibility in ethical/moral matters that include; matters of fraud
mitigation, document retention, control activities, information/communication factors, monitoring,
and assessing risk. This paper argues that ... Show more content on Helpwriting.net ...
* Recommendation: Establish an Audit Committee to have oversight of accounting department.
Findings reflect a lack of establishment of responsibility; including essential assignment of
individuals that concludes an individual being responsible for a task, and another maintaining
physical custody. This also includes the responsibility including authorizations and approval for
transactions (Kimmel, Weygandt & Keiso, 2009). * Recommendation: Allow safe to be placed
under physical control of an individual and independent person is identified to conduct physical
security reports on the safe. The safe should be placed somewhere in which two individuals are
required to access and lock, and record is maintained of access to the safe and checked by
supervisor. Segregation is essential to the system of internal controls. Although LJB Company is
streamlined for maximum efficiency some recommendations for segregation would be required prior
to going public. * Recommendation: Allow for related activities to be assigned to different
individuals such as receiving checks and conducting bank reconciliation. Physical custody
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The Sarbanes-Oxley Act
In this paper, we will be discussing how Sarbanes Oxley has affected the American business and if it
has accomplished its goals. The goal of the Sarbanes–Oxley Act (SOX) is to convey confidence in
the stock exchange, but it does not defer all immoral activities that take place on the stock exchange.
People no matter the law, are responsible for the quality of their work and are accountable for the
integrity of themselves and their company. Their own ethical values can take precedence over those
set by Sarbanes–Oxley. Not all values are equal in quality, and a person may go above the rules
delegated by Sarbanes–Oxley, however, there is another side. Sarbanes–Oxley has created a fear
among business practitioners that this new set of standards ... Show more content on Helpwriting.net
...
Congress enacted the Sarbanes–Oxley (SOX) Act of 2002 to restore investor confidence by
requiring public companies to strengthen corporate governance through several mechanisms,
including enhanced disclosure on Internal Control Over Financial Reporting (ICFR). As claimed by
regulators, the disclosures on the effectiveness of ICFR are aimed at improving the quality of
financial reporting, which would, in turn, reduce the information asymmetry for investors in U.S.
capital markets" (Donaldson). Sarbanes– Oxley named after its creators, Senator Paul Sarbanes, D–
Md and Congressman Michael Oxley, R–Ohio. Enacted in 2002 with the purpose to crack down on
corporate fraud. The implementation of Sarbanes–Oxley led to the creation of the Public Company
Accounting Oversight Board (PCAOB) to oversee the accounting industry. It was created to
eliminate corporate fraud, and it put in place a ban on company loans to executives while also giving
job protection to whistleblowers. Before SOX was put into place the accounts were a self–regulated
profession, such as medical professionals and lawyers. This is what led to the fraudulent actions of
major institutions, people can be greedy, and they need checks and balances to ensure the fidelity of
the firm. There are criminal enhanced penalties for corporate fraud and related misdeeds, this brings
justice to the sector as well as working as a deterrent for additional immoral
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Sarbanes Oxley Act and the PCAOB Essay
The Sarbanes–Oxley Act Overview:
The development of the Sarbanes–Oxley Act (SOX) was a result of public company scandals. The
Enron and Worldcom scandals, for example, helped investor confidence in entities traded on the
public markets weaken during 2001 and 2002. Congress was quick to respond to the political crisis
and "enacted the Sarbanes–Oxley Act of 2002, which was signed into law by President Bush on July
30" (Edward Jones, 1), to restore investor confidence. In reference to SOX, penalties would be
issued to non–ethical or non–law–abiding public companies and their executives, directors, auditors,
attorneys, and securities analysts (1). SOX significantly transformed the procedures in which public
companies handle internal ... Show more content on Helpwriting.net ...
Title I: Public Company Accounting Oversight Board: The PCAOB gives a new meaning to the
public accounting industry. The board must be composed of five members, appointed for a 5–year
term, two of which are Certified Public Accountants (CPAs) or have previously been CPAs, and
three of which have never been CPAs. The chair of the PCAOB may be a CPA, but only if he has
been out of practice for at least five years. "The members must be independent of the accounting
profession as no member may, concurrent with service on the board, share in any of the profits of, or
receive payments from, a public accounting firm, other than fixed payment such as retirement
payments" (4). All members of the PCAOB must be appointed by the Securities and Exchange
Commission (SEC). The board performs various jobs which include: "oversee the audit of public
companies, establish audit report standards and rules, inspect, investigate and enforce compliance on
the part of registered public accounting firms and those associated with the firms" (4). Not only do
public accounting firms who audit the financial reports of public companies have to register with the
PCAOB, but foreign public accounting firms must register as well. The standards of auditing
include:
A seven–year retention period for audits work papers, second partner review and approval,
evaluation of whether internal control structure and procedures include records that accurately
reflect transactions and dispositions of
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The Five Components Of Internal Controls In An Accounting...
This paper sets out to define and really discuss what an internal control is and how it came to be. It
will touch on what purpose an internal control serves to an Accounting Information System. This
paper will look at the five components of internal controls that were created by COSO. It will
provide a definition and example for each of these components. It also touches on some of the
advantages and disadvantages that can occur when implementing an internal control system. The
hope is this paper provides a better picture of just how important internal controls are for an
organization to run efficiently and effectively. Keywords: Internal control, Accounting Information
Systems, Fraud, Sarbanes–Oxley, Components This paper will be discussing Internal Controls in an
Accounting Information System (AIS). We will be defining what an internal control is, what is its
purpose and how it benefits entities. We will even touch on some of the problems that can occur
with internal controls. There are five components that make up internal controls, they are Control
Environment, Risk Assessment, Control Activities, Information and Communication, and
Monitoring. These components will be discussed in more detail as well, we will look at what each of
these does and what purpose they serve. What are Internal Controls When talking about Internal
Controls we should define what an Accounting Information System is. Accounting Information
Systems are "a specialized subsystem of
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History of Sox
History of Sarbanes Oxley and the Reasons for Enactment
Virginia Knight
Student ID: 6892460166
Accounting Capstone
Senior Seminar in Accounting
ACC 499 006016 Spring 2009
Submitted to: Professor Tee Thein
June 19, 2009
Abstract:
In 2002 the Sarbanes–Oxley Act was passed. This is a mandatory act that all organizations, large and
small, must comply with. This legislation introduced major changes to the regulation of financial
practice and corporate governance. There are eleven titles to the Sarbanes–Oxley Act. The act is
named after its main architect, Representative Michael Oxley and Senator Paul Sarbanes. Former
President Bush is quoted saying that it is intended to "deter and punish corporate and accounting
fraud and ... Show more content on Helpwriting.net ...
"The results noted a distinct difference between companies that had reached compliance with SOX
and those that had not."
CHAPTER 2
Eleven Titles of SOX
The objective of the eleven titles of the Sarbanes–Oxley Act is to ensure that auditors remain
independent; corporations and auditors are accountable to the public for the numbers they publish;
an independent body governs financial reporting processes; sufficient measures are in place to deter
fraudulent activity; financial activities are transparent enough to allow fraud detection to occur; and
if fraud is detected, someone is held responsible.
Public Company Accounting Oversights Board Section 101 of the Sarbanes–Oxley Act establishes
the Public Company Accounting Oversights Board (PCAOB). The Board consists of five
financially–literate members that are appointed for five–year terms. Three of these members must
not be a CPA currently nor have been one in the past. The other two members must be, previously or
currently, a certified public accountant. The main focus of this Board is (1) to register along with
discipline accounting firms that prepare audit reports on companies that are public; (2) conduct
inspections and/or investigations of registered accounting firms that audit public companies; and (3)
establish audit and accounting standards.
Auditor Independence Sections 201, 203 and 204 outline the
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Essay about Critique of the Effectiveness of the...
Background
George W. Bush called the SOX Act "the most far–reaching reforms of American business practices
since the time of Franklin Delano Roosevelt".
It has been a decade since the Sarbanes–Oxley Act became in effect. Obviously, the SOX Act which
aimed at increasing the confidence in the US capital market really has had a profound influence on
public companies and public accounting firms. However, after Enron scandal which triggered the
issue of SOX Act, public company lawsuits due to fraud still emerged one after another. As such, the
efficacy of the 11–year–old Act has continually been questioned by professionals and public. In
addition, the controversy about the cost and benefit of Sarbanes–Oxley Act has never stopped.
Introduction ... Show more content on Helpwriting.net ...
Many SOX related studies have indicated that significant costs were incurred by "managerial
diversion." This opportunity cost increased as managers diverted their attention to "designing,
documenting and ensuring compliance with new internal controls" ( Ahmed, 2010). The following
paragraphs explore how costly the overall SOX Act is for all the public companies to comply with it,
since 2004; the key components of the direct SOX compliance costs; indirect costs associated with
SOX Act; and SOX related costs specifically for small business and businesses with weak internal
controls.
Significant Compliance Costs in 2004
The SOX Act has always been described as "an endless list of compliance requirements" with no
productive benefit (Hunter, 2007). Most of the costly compliance requirements are included in
section 404 of SOX Act. "It's turned out to be a gorilla," said Charles Elson , "Its costs are
phenomenal" (Quoted by Philadelphia Business Journal). Despite the unapparent recovery of
investors' confidence, complaints about the greatly increased costs have been heard everywhere.
Obviously, the complaints came from the affected companies. To comply with the requirements of
section 404 of SOX which is related to internal control, audit firms need to spend much more on the
testing of a company's internal control, the cost of which would certainly be passed on to their
clients. In addition to increasing audit fees paid to auditors, more costs have been
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Essay on Internal Controls and the Sarbanes-Oxley Act
Internal controls are in place to protect entities against theft from dishonest workers and outside
predators. They are also an accurate series of checks and balances and are in place to find
discrepancies. The Sarbanes–Oxley Act of 2002 (SOX) was named after Senator Paul Sarbanes and
Michael Oxley. The Act has 11 titles and there are about six areas that are considered very
important. (Sox, 2006) The Sarbanes–Oxley Act of 2002 made publicly traded United States
companies create internal controls. The SOX act is mandatory, all companies must comply. These
controls maybe costly, but they have indentified areas within companies that need to be protected. It
also showed some companies areas that had unnecessary repeated practices. It ... Show more content
on Helpwriting.net ...
With technology today hackers can gain access into a company's system and retrieve information.
Theft of company hardware is a limitation. A person can steal a company's computer hard drives that
have valuable information stored on them and retrieve the information off them. There are four
different ways to establish internal control. They are all effective methods. One is establishing
responsibility. Establishing responsibility states that one employee should be responsible for doing a
certain task. If one employee is doing a specific duty, there is a clear way of accountability. An
employee is responsible for his or her cash register during that shift. When the shift ends the cash
drawer can be counted. Other internal controls are physical, mechanical, and electronic. A company
can physically safeguard the assets by hiring a security guard, putting them in a locked safe, or
secure the assets in a locked warehouse. Mechanical and electronic controls consist of employees
using a time clock to punch in and off work to ensure accurate time keeping of hours worked. A
company can put sensors on items to prevent theft of merchandise or install alarms systems to
prevent break ins. Segregation of duties is an internal control. Segregation of duties allows two
employees to be
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The Sarbanes-Oxley Act (SOX) Act
Introduction: "... The era of low standards and false profits is over; no boardroom in America is
above or beyond the law." (Bumiller) By way of landslide votes in both the U.S. House of
Representatives and the U.S. Senate, in July of 2002, the Sarbanes–Oxley (SOX) act was approved.
To understand the cause and effect of this landmark legislation, the SOX act warrants exploration of
the events leading to its creation, the details of the act itself, and the impacts on responsibilities to
both firms' management teams and their auditors. While the implementation of Sarbanes–Oxley has
been positive for investors, company managers and auditors, specifically, are bearing the burden of
complying with SOX through significantly greater responsibilities. ... Show more content on
Helpwriting.net ...
Andersen's reputation was so tarnished from the revelations of the conspiracy that no public
company would have Arthur Andersen as an auditor. Andersen's practice was disbanded and has
now become defunct with only a handful of employees still working for the firm as they continue to
wind down the business. In July of 2002, not long after the exposure of the Enron accounting fraud
and bankruptcy, WorldCom Inc. filed for Chapter 11 bankruptcy protection. WorldCom Inc.
admitted that the company had fraudulently misclassified over $3.8 billion in payments for line
costs as capital expenditures rather than current expenses (Beresford). The company's executives
perpetrated this fraud, grossly overstating revenues by improperly transferring billions of dollars in
line cost expenses to asset accounts over a number of years. These transfers reduced WorldCom's
reported line costs and increased pre–tax income by $7 billion overall (Beresford). These two
disgraceful accounting frauds by senior and executive managers at Enron and WorldCom, as well as
similar events that took place at other public companies in the early to mid–2000s and the Arthur
Andersen conspiracy were the genesis for the call of accounting reforms and auditor independence
that would ultimately become the
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Essay about The Loss of Ethics and Trust in Corporations...
Something that is widely down spread due to some of the current allegations within corporations is
ethics and trust. Many individuals including myself look at shows such as Cops and Cheaters as
drama and action but it is merely nothing more than ethics and trust right in front of our eyes. The
effects of our daily lives not only affect us but so many others. I remember during high school that
Enron, a huge corporation at the time, wasn't doing so well and yet they had "cooked the books".
That means that basically that they were forging and falsify their records to perceive as if they were
being successful. It is easy now to look back on it and say the company did it to seem attractive for
potential investors. We know the outcome of their ... Show more content on Helpwriting.net ...
The internal controls were correctly monitored within the previous ninety days and have been
reported on their findings. We must have a list of all deficiencies in the internal controls and
information on any fraud that involves employees who are involved within the internal activities.
The report must also include any major noteworthy changes in internal controls that could have a
negative impact on the internal controls. (Barth, 2012)
Section 401 includes disclosers in the periodic reports. Financial statements which are published by
issuers are required to be accurate and presented in a manner that does not falsify or not disclose any
significant state material. These financial statements shall also include all out of balance obligations
or transactions. The Commission was required to study and report on the extent of off–balance
transactions resulting transparent reporting. The Commission is also required to determine whether
generally accepted accounting principles or other regulations result in open and meaningful
reporting by issuers. (Barth, 2012)
Section 404 is what many refer to as the most complicated, most contested, and most expensive to
implementation of all the Sarbanes Oxley Act sections. "All annual financial reports must include an
Internal Control Report stating that management is responsible for an "adequate"
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ACCT 504 Case Study 2
Internal Controls: Requirements and Recommendations for LJB Company Prepared For: LJB
President Prepared By: February 5, 2013 Table of Contents
Introduction............................................................................................3 Internal Control
Requirements for Publicly Traded Companies................................3 Current Strengths in Internal
Controls..............................................................4 Current Weaknesses in Internal
Controls.........................................................6 Summary and
Conclusion.............................................................................8
Bibliography.........................................................................................10 Introduction LJB Company
inquired about new internal control regulations required if they choose to go public. This report will
discuss the regulations ... Show more content on Helpwriting.net ...
341). By using pre–numbered invoices, LJB Company is able to have a more reliable method of
recording transactions. The accounting department can ensure that transactions are not duplicated or
overlooked. Kimmel, Weygandt, & Kieso (2013) suggest, "this control measure helps to ensure
timely recording of the transaction and contributes directly to the accuracy and reliability of the
accounting records" (p. 341). The internal control of physical controls is also being utilized by LJB
Company. Physical controls "relate to the safeguarding of assets and enhance the accuracy and
reliability of the accounting records" (Kimmel, Weygandt, & Kieso, 2013, p. 342). The accountant
secures the paychecks in a safe in his office before he leaves for weekend. By securing the
paychecks in the safe, other individuals are unable to get to the checks during the weekend.
Although there are improvements that need be made to the paycheck process, locking the paychecks
in a safe over the weekend is a strong internal control that protects a valuable asset. LJB Company
should buy the indelible ink machine in order to reduce fraud and theft. The indelible ink machine
would prevent others from altering checks once they were printed. The purchase of the ink machine
would involve the internal control principles of physical controls, segregation of duties, and
establishment of responsibility. The ink machine would
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The Implications of the Sarbanes Oxley Act on the...
The Implications of the Sarbanes Oxley Act on the Accounting Profession
Abstract
On July 30, 2002, the Sarbanes Oxley Act (also known as SOX) was signed into law by President
George W. Bush. The Sarbanes Oxley Act of 2002 is a federal law that set new or improved
standards for all U.S. public company boards, management and public accounting firms. Covered in
the eleven titles are additional corporate board responsibilities, auditing requirements and criminal
penalties. This essay reviews the implications of the Sarbanes Oxley Act on the accounting
profession.
The Implications of the Sarbanes Oxley Act on the Accounting Profession
President George W. Bush signed the Sarbanes Oxley Act into law on July 30, 2002. ... Show more
content on Helpwriting.net ...
Section 802 specified fines up to as much as five million dollars and up to twenty years
imprisonment, or both. Section 1107 mentions fines and up to ten years imprisonment for any
harmful actions retaliated toward whistleblowers (FindLaw, 2002). External auditors (only those
registered with the Public Company Accounting Oversight Board) were required to review these
financial statements and issue opinions on the accuracy of the financial reports and whether
effective internal
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Swot
Sarbanes Oxley Act of 2002
The Sarbanes–Oxley Act of 2002 is a United States federal law enacted on 30th July 2002, also
known as the Public Company Accounting Reform and Investor Protection Act of 2002 and
commonly called SOX or Sarbox. This law was passed in response to a number of major corporate
and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine
Systems and WorldCom. These scandals, which cost investors billions of dollars when the share
prices of the affected companies collapsed, shook public confidence in the nation 's securities
markets. Named after the sponsors Senator Paul Sarbanes of the Democratic party of Maryland and
Representative Michael G. Oxley of the Republican party of ... Show more content on
Helpwriting.net ...
Given that the professional costs and managerial time varies little with company size, small and
mid–sized companies must allocate a higher percentage of revenue to SOX compliance
(Morgenstern and Nealis, 2004). Many of these firms have considered such measures as reverse
stock splits to shrink the company to a size below that required to meet SOX's strictest requirements,
or have considered delisting the company.
According to Wharton School study, most companies de–listed their shares in an attempt to avoid
the high costs of complying with the SOX Act, with some smaller companies listing costs of as high
as $500,000 to comply. Some companies, however, de–listed to avoid outside monitoring and
scrutiny, leading the study's authors to suspect that firms were not being managed in the most
efficient way or that their compensation was excessive. The study found that some of the firms with
"higher free cash flow and lower–quality accounting" were more likely to "go dark" – to deregister
from the SEC and become private firms (AP, 2004). Independence of board members may also place
hardships on smaller companies. Many publicly listed small companies have few board members,
and the chief financial officer may act in the capacity of other positions. Smaller firms may not have
the resources necessary to recruit qualified individuals to meet independence requirements.
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Essay on Sarbanes-Oxley Section 404 and Affect on Small...
Analysis of Sarbanes–Oxley – Section 404
And
Affect on Small Companies
Content
I. Executive Summary 1
II. Background Facts 2
III. Issue Stated 3
IV. Analysis 4–5
V. Conclusion 6
VI. References 7
Executive Summary
404 of Sarbanes Oxley: It's affect on small business.
The implementation of section 404 of Sarbanes–Oxley's has presented challenges for many U.S
businesses. The implementation rules and guidelines have imposed significant cost and time
restraints. Small ... Show more content on Helpwriting.net ...
Senate action.[18] The PCAOB intends to issue further guidance to help companies scale their
assessment based on company size and complexity during 2007. The SEC issued their guidance to
management in June, 2007
The most visible argument is that small companies should not have to shoulder the same compliance
burdens as large companies do, simply because they can't afford to. But that premise is being
challenged by studies, derided by a number of commentators and viewed with public skepticism
even by some SEC Commissioners. It assumes that were money no object, small and large
companies should be regulated the same. If that assumption is true, then any argument for relaxed
compliance that hinges on expense is vulnerable. Cost seldom satisfies as a reason for not doing
something that ought otherwise be done.
However, it is wrong to assume that the main difference between small and large companies is how
much money they have. Large and small companies play very different roles in the national
economy and in the minds of investors. The very large companies really are different than their
smaller brethren, and not just because they have more money.
According to the Chicago–based law firm's study, public companies with more than $1 billion in
annual revenue spent an average $10 million on
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The Sarbanes Oxley Act
In the begging of 2000's after a period of corporate scandals involving large public companies,
senate enacted the Sarbanes–Oxley Act, which is referred to as SOX or Sarbon. The act was enacted
14 years ago on July, 30 2002. Also this act was known as the "Public Company Accounting Reform
and Investors Protection Act of 2002." There are many serious accounting and corporate scandals
that influenced companies Tyco International, Global Crossing, Enron, WorldCom. For instance the
bankruptcy of "ENRON" in 2001 was the one of largest bankruptcy in the U.S. history. That time
investors lost $74 billion and thousand employees losing their jobs, retirement savings and medical
plans. The time during the scandals happened, where the mentioned ... Show more content on
Helpwriting.net ...
The study of their complicated cases made to create new public demand for reform.
Before the congress enacted this act, there were dozens cases of auditor conflicts of interest. SOX
gives public companies new, exact and limited derectives. Prior to SOX auditing companies,
accounting profession, chief financial supervisors from investors side were largly self–regulated.
They also performed essential consultancy or not related to audit work for the companies they
performed to audit. All consulting services were based on agreements many of which were far more
profitable for auditors than that of the auditing services provided. This is factual representation of
the conflict of interest.
There were also problem in board. Board members also involved in scandal. Boards of Directors,
especially Audit Committees, are made some mechanisms were financial reporting parts for
investors were oversight. They either didn't perform their obligations, responsibilities or didn't
understand business complex duties to perform their work. Audit Committee members were much
dependent on management as should be and they were not perform independent decisions. Stock
market analysts, who make decision buy or sell company bonds and stock, and investment bankers
that give companies loans or handle mergers and acquisition are another conflict. Banking practices
conflict leading to a firm lends
... Get more on HelpWriting.net ...
Lge 500 Week 10 Discussion 1&2 Essay
"Underlying Causes" Please respond to the following:
Analyze at least three underlying causes for the creation of the Sarbanes–Oxley Act. Next, rank the
causes that you have analyzed from the most important to the least important to the creation of the
Act. Explain your rationale.
In the later part of 1990s, there was an epidemic of accounting scandals which arose with the
disclosure of financials transgressions by trusted corporate executives. The misdeeds involved
misusing or misdirecting funds, understating expenses, overstating the value of corporate assets or
underreporting the existence of liabilities, and overstating of revenues.
Some of the companies involved in the creating accounting practice in the late 1990s and early ...
Show more content on Helpwriting.net ...
There were a lot of pointing fingers in the accounting scandals that plagued the economy in the
1990s within the companies involved. Congress decided to hold the CEO and CFO responsibility for
any financial misreporting. This made the third most important causes of creating SOX.
Determine three most important provisions of the Sarbanes–Oxley Act. Provide a scenario or
example of each to justify why each provision that you determined is important
Sarbanes–Oxley was motived by the never–ending waves of corporate financial scandals by Enron,
Arthur Andersen, WorldCom, Waste Management, Global Crossing etc. There are 11 sections in the
act. There following are the three (3) most important provision in the Sarbanes Oxley Act due to the
simple fact that The US Congress were trying to enact a law to combat corporate fraud and
misleading of investors:
The three (3) most important provisions of Sarbanes–Oxley include: * Creation of PCAOB *
Auditor independence and a prohibition on audit firms offering value–added (read "conflict of
interest") services * Certification of financial reports by CEOs and CFOs
First, Congress saw the need to create an independent body to oversee the audit of public companies
that are subject to the securities laws. PCAOB was established to protect the investors and further
the public interest in the preparation of informative, accurate, and independent audit reports for
public companies. Before the SOX, The
... Get more on HelpWriting.net ...
Sarbanes Oxley Act Research Paper
Sarbanes Oxley Act
Research Project
Brielle Lewis
MBA 315
March 6, 2014
I. Abstract
The purpose of the Sarbanes–Oxley Act is to protect investors by improving the accuracy and
reliability of corporate disclosures made pursuant to the securities law, and for other purposes.
(Lander, 2004) The Act created new standards for public companies and accounting firms to abide
by. After multiple business failures due to fraudulent activities and embezzlement at companies such
as Enron Sarbanes and Oxley recognized a need for the revamping of our financial systems laws,
rules and regulations. Thus, the Sarbanes–Oxley Act was born.
II. Background/Purpose
The Sarbanes Oxley Act was signed into law on July 30, 2002 by then President ... Show more
content on Helpwriting.net ...
(Green, 2004)
IV. Requirements for Publicly Traded Companies
Public companies issuing securities, public accounting firms, and firms providing auditing services
whether they are domestic or foreign must comply with Sarbanes–Oxley. (Sarbanes–Oxley Act
Section 404, 2002) Additionally, publicly traded companies with a market capitalization greater than
$75 million must comply with these new rules. (Don E. Garner, 2008) A company's management is
required to provide an external auditor with all financial statements for the current review period.
Upon reviewing these statements the auditor issues a report classified as unqualified, unqualified
with explanation, qualified, adverse, or disclaimer based on what they find or do not find. All public
companies reports are available on the Securities Exchange Committees website, below is a sample
of what this report looks like. You can imagine what a relief this was for investors, to be able to
search any company and find statements solidifying their prospective investment.
Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders
of McDonald's Corporation
We have audited the accompanying consolidated balance sheets of McDonald's Corporation as of
December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive
income, shareholders' equity, and cash flows for each of the three years in the period
... Get more on HelpWriting.net ...
Sarbanes-Oxley Act 2002
The Sarbanes–Oxley Act of 2002 (often shortened to SOX) is legislation passed by the U.S.
Congress to protect shareholders and the general public from accounting errors and fraudulent
practices in the enterprise, as well as improve the accuracy of corporate disclosures. The U.S.
Securities and Exchange Commission (SEC) administers the act, which sets deadlines for
compliance and publishes rules on requirements.
The Sarbanes–Oxley Act was enacted in response to a series of high–profile financial scandals that
occurred in the early 2000s at companies including Enron, WorldCom and Tyco that rattled investor
confidence. The act, drafted by U.S. Congressmen Paul Sarbanes and Michael Oxley, was aimed at
improving corporate governance and accountability. ... Show more content on Helpwriting.net ...
Chief legal counsel for companies of all sizes will follow the proceedings closely, watching the
jury's deliberations and gauging its reaction to the prosecution. (Longnecker, 2004).
Passed in the wake of last year's corporate accounting scandals, the Sarbanes–Oxley Act requires
public companies to disclose more financial information than in the past, and it holds corporate
directors and officers more accountable for the accuracy of disclosures than ever before. Sarbanes–
Oxley also requires companies' top officers to assess and certify the effectiveness of the internal
controls they use for financial reporting.
Some of the Sarbanes–Oxley requirements aren't entirely clear, and the Securities and Exchange
Commission, which implemented the law, hasn't been all that helpful. In comments on section 404,
the SEC ruled that beginning with a company's fiscal year ending on or after June 15, 2004, it must
issue four statements: one indicating management's responsibility for maintaining internal controls;
one identifying the framework used to evaluate internal controls; one saying the company's auditor
attests to management's assessment; and one assessing the effectiveness of internal–reporting
... Get more on HelpWriting.net ...

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Sox Act Memo

  • 1. Sox Act Memo The purpose of this memo is to provide you with information on the Sarbanes–Oxley Act of 2002 (SOX Act) and to describe the importance of its implementation, per your request. The SOX Act was first introduced in the house as the "Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002" by Michael Oxley on February 14, 2002. Paul Sarbanes, a Democrat U.S. Senator, collaborated with Mr. Oxley, a Republican US Senator, creating significant bipartisan support. The SOX Act was enacted by the end of July 2002 in response to recent corporate accounting scandals. The twin scandals that were impetus for the legislation involved the corporations of Enron and WorldCom. THE PURPOSE OF THE ACT The main purpose of the Sarbanes ... Show more content on Helpwriting.net ... This is because when the SOX Act was enacted it provided detailed guidelines with strict sentences if these guidelines were not followed. David E. Hardesty, accountant and author of Corporate Governance and Accounting Under the Sarbanes–Oxley Act of 2002, said it very well, stating "Each place where information could be altered, either inadvertently or on purpose, Sarbanes–Oxley attempts to fix it. These problems were created by people who were willing to take the risk that they could cook the books and get away with it. In today's environment, the feeling is that if we cook the books, we might get caught." The following chart shows how since the SOX Act has been implemented there has been a reduction in lawsuits. According to the research by Cornerstone Research in 2007, they found that some legal experts credit the SOX Act and tougher enforcement to the drop in lawsuits which they believe is a positive effect of less fraud. According to the study, the number of lawsuits dropped from about two– hundred–twenty–five in 2002 to about sixty lawsuits in 2007. These are astonishing numbers yet prove that there have been excellent results from the implementation of the SOX ... Get more on HelpWriting.net ...
  • 2.
  • 3. Acct 504 Case Study 2 Internal Control Report For LJB Company Table of Contents Introduction 3 IPO and Internal Controls 3 Successful Existing Internal Controls 4 Internal Controls for Consideration 4 Conclusion 5 Bibliography 6 Introduction Internal controls are vital to any company's business and financial sustainability. Internal controls consist of measures taken by a company safeguarding against fraud, and theft. Internal controls ensure accuracy and reliability in accounting data, and secure policies within the organization. Further, internal controls evaluate all levels of performance. These are addressed with five principles ... Show more content on Helpwriting.net ... However, one person acting as accountant, treasurer and controller places an imbalanced access to the companies invoice process, ordering process, check cashing process, and he alone decides what of these activities gets recorded in the Company books. We recommend that two other employees be assigned the respective Treasurer and Controller duties. Establishment of responsibilities must be outlined and assigned. At this point there is concern over the accountant being solely responsible for the ordering of supplies, and paying for supplies. There are no current controls in place to ascertain what supplies are being ordered and paid for against supplies that are actually received. One employee needs to be assigned the job of ordering supplies and creating a purchase order. The accountant can check the invoice received by the supply company against the purchase order and then pay for the supplies. Several physical controls should be immediately executed for LJB Companies. Restrictions need to be in place on the petty cash fund, adequate documentation for use of petty cash funds must be implemented. The purchase of the indelible ink check printing machine should reduce the need for petty cash access. Password protection on all computers should be required, with an identification and unique password for each employee. Restrictions of access to pornographic websites ... Get more on HelpWriting.net ...
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  • 5. Essay on Overview of the Sarbanes-Oxley Act (SOX) The Sarbanes–Oxley Act, frequently known as the SOX. The act was passed on in 2002 as a federal United States law. The law was drafted in response to the numerous numbers of financial scandals performed by high profile corporations such as Johnson & Johnson. The action has created a new company standard of responsibility in order to protect the valued stakeholders, as well as the public, from the deceitful practices of various organizations. The Sarbanes–Oxley Act ... Show more content on Helpwriting.net ... As a result of authorizing the Sarbanes Oxley necessities for the non profits healthcare firms, fraud connected matters can be decreased. In addition to this it can as well be advantageous for those increasing the business supremacy of the not for profit hospitals. Completion of a number of SOX segments like for instance changing the lead review partners, setting up a review committee together with pre approving non review fees would be obliging for the non profit healthcare businesses in rising of the corporate governance (Act, 2002). Other additional SOX facts state: The legislation acquires its name from the authors who is Senator Paul Sarbanes along with the Representative Michael Oxley The Senate election: 99–0 The Act holds 11 designate sections The Public Company Accounting Oversight Board ( PCAOB ), which was created to regulate, direct, and discipline firms in regards to their fulfillment to this law. The conditions of Sarbanes Oxley have always been effective in regulating the principled behavior of the for profit health care businesses. It is for the reason that as SOX have need of growth of a system of principles, it gives confidence to the employee in order to report any form of immoral and deceitful behavior without the fear of revenge. in addition, when following the SOX provisions , for the profit making healthcare ... Get more on HelpWriting.net ...
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  • 7. Essay on The Sarbanes-Oxley Act There are so many organizations today that are using the Sarbanes–Oxley (SOX) legislation that helps to safeguard their company and their financial records. The Sarbanes–Oxley act began in 2002 and the purpose behind this act was to protect organizations, it had a major impact on accounting and record keeping. Because of Enron, they passed this act for publicly–traded corporations to better implement control to their enterprise data. "Named after Senator Paul Sarbanes and Representative Michael Oxley, who also set a number of deadlines for compliance" (SOX Law ). "The Sarbanes– Oxley Act is arranged into eleven titles, but the most important sections within these are often considered to be 302, 401, 404, 409, 802 and 906" (SOX Law ). The ... Show more content on Helpwriting.net ... This is the type of service that IBM is offering to their customers, and being SOX compliant. "Section 404 mandates that company provide an annual report on internal controls, attested to by an external audit firm" (IBM). While IBM is offering these services there are other companies that are doing the same service too. Protiviti an independent global risk and internal audit advisory firm, surveys client attitudes about the costs, and the benefits, of compliance with the law. Protiviti in many cases is helping to manage document controls, to perform tests, and develop an option of the internal controls that the external auditors rely on. According to this company they believe that "Companies with weak or non– existent internal controls over financial reporting are more susceptible to fraud and those frauds will take longer to uncover" (McKenna, 2011). They have reported that a lot of companies spend between $100,000 and 1,000,000,000 on compliance activities; this depends on the size of the company. About 50 percent of companies do most of their SOX work internally within the company. Within the corporation, Protivite address the smaller companies in three areas where their internal control compliance. Companies will find that they are behind in IT general controls, spreadsheet controls, and segregation of duties. They are doing what they can to help in these areas. To conclude, the Sarbanes–Oxley act ... Get more on HelpWriting.net ...
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  • 9. Sarbanes Oxley Outline 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 and a series of fraudulent accounting procedures involving special purpose entities were about to be exposed. In early 2002, the United States Justice Department announced its intent to pursue a criminal investigation into the once mighty company, Enron. After the gross negligence of accounting ... Show more content on Helpwriting.net ... Passing of Sarbanes by Congress to limit corporate accounting violations. (Sarbanes Oxley Act of 2002) 2. The creation of the Public Company Accounting Oversight Board and its controversial creation. a. The mandatory registration of public accounting firms who prepare audits for public companies. b. The extensive rules given to accounting firms under §103 of Sarbanes Oxley and the complexity of their application. c. How public accounting firms are unable to handle increased auditing and accounting demands by public companies. 3. Increase in expenses for businesses to achieve compliance with Sarbanes standards. a. Inaccurate calculations made by Congress minimizing the costs associated with Sarbanes compliance. (Feeney, T., The Heritage Lectures; No. 995) b. Businesses struggle with the cost of accounting department upgrades for internal audit procedures due to lack of funds. c. The slow destruction of the U.S. economy where companies find more benefits of going public in overseas markets or selling to private equity firms. 4. The controversy surrounding Sarbanes §404 and its application to corporate accounting. (In re Buca Inc. Secs. Litig, 2006) a. The ambiguity Sarbanes §404 presents for corporate management and the relationship of external auditors. (In re Cardinal Health, Inc. Sec. Litigs., 2006) b. The inability for accounting firms to interpret and apply Sarbanes §404 clearly for publicly held corporations. ... Get more on HelpWriting.net ...
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  • 11. Sarbanes-Oxley Act Advantages And Disadvantages THE TAX ADVANTAGES OF DISADVANTAGES OF SARBANES–OXLEY Name Institution Date The Tax Advantages and Disadvantages of Sarbanes–Oxley The Sarbanes–Oxley is an Act passed by the U.S congress in the year 2002. Its main aim was to protect investors from exposure to fraudulent activities through accounting activities by United States corporations. Due to the increase in fraudulent activities by large corporationssuch as Enron Corporation at the turn of the 21stcentury, the United States congress passed the Act. However, this essay would identify the pros and cons associated with this Act. The Sarbanes–Oxley Act takes into account recent cases such as the multibillion fraudulent cases such as the Enron scandal that led to the fall of the ... Show more content on Helpwriting.net ... (2009). The Economic Benefits of the Sarbanes–Oxley Act? Evidence from a Natural Experiment (1st Ed.). Boston. Retrieved from http://fic.wharton.upenn.edu/fic/papers/09/0941.pdf Clark, K. (2012). The Effects of Sarbanes Oxley on Current Financial Reporting Standards (1st Ed.). Retrieved from http://digitalcommons.liberty.edu/cgi/viewcontent.cgi?article=1303&context=honors Green, S. (2004). A Look at the Causes, Impact and Future of the Sarbanes–Oxeley Act (1st Ed.). Retrieved from http://scholarlycommons.law.hofstra.edu/cgi/viewcontent.cgi? article=1024&context=jibl Grinberg, E. (2002). The Impact of Sarbanes Oxeley Act 2002 on small firms (1st Ed.). Retrieved from http://digitalcommons.pace.edu/cgi/viewcontent.cgi? article=1055&context=honorscollege_theses Hopkins, B. (2016). The Successes and Shortfalls of the Sarbanes –Oxley Act of 2002 (1st Ed.). Retrieved from http://collected.jcu.edu/cgi/viewcontent.cgi?article=1098&context=honorspapers Jahmani, Y. (2016). Pros and Cons of Sarbanes– Oxeley Act (1st Ed.). Retrieved from ... Get more on HelpWriting.net ...
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  • 13. Sarbanes-Oxley Act Research Paper Sarbanes–Oxley Act of 2002 Karla Azcue ACC 120–09 Mr. Donald Senior The Sarbanes–Oxley Act of 2002 is one of the most important legislations passed in the 21st century effecting financial practice and corporate governance. This act was passed on July 30, 2002 thanks to Representative Michael Oxley a republican from Ohio and Senator Paul Sarbanes a democrat from Maryland. They both passed two different bills that pertain to the same problem which had to do with corporation's auditing accountability and financial fraud problems within corporations. One was bill (S. 2673) brought by Senator Sarbanes and the other bill (H. R. 3763) brought by Representative Oxley. Both bills where passed separately one by the house and the other by the ... Show more content on Helpwriting.net ... • Employee protections allowing those corporate fraud whistleblowers who file complaints with OSHA within 90 days to win reinstatement, back pay and benefits, compensatory damages, abatement orders, and reasonable attorney fees and costs. Furthermore, according to soxlaw.com an online guide to the Sarbanes–Oxley Act the major compliances to the act rest on 5 sections: • The first one is the Sarbanes–Oxley section 302, which is found under Title III of the act, pertaining 'Corporate Responsibility for Financial Reports'. This section asks for sporadic legal financial reports to include ... Get more on HelpWriting.net ...
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  • 15. Sarbanes-Oxley Act Pros And Cons The year 2002 marked a critical time for many corporate businesses as it was known for one of the most infamous years in organizational scandal. The Enron debacle, Tyco, Adelphia, and WorldCom all were involved in some sort of corruption. These corporations misfortunate mishaps was the driving force for the implementation of ethical laws. One law in particular was the Sarbanes–Oxley Act (SOX). This law was enacted to help restore integrity and public confidence to the financial markets (Orin, R. 2008). The Sarbanes–Oxley Act is not a law that is new to the scene of corporate America, in fact in 1934 the Securities and Exchange Commission was introduced to help police the U.S. financial markets. As a result, ... Get more on HelpWriting.net ...
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  • 17. Sarbanes-Oxley Act (SOX) Essays Introduction In July of 2002, Congress swiftly passed the Public Company Accounting Reform and Investors Protection Act at the time when corporations like Arthur Anderson, Enron and WorldCom fell due to fraudulent accounting practices and bad internal control. This bill, sponsored by Mike Oxley (R– OH) and Paul Sarbanes (D–MD), became known as Sarbanes–Oxley Act (SOX).It sought to restore public confidence in publicly traded companies and their accounting practices, though the companies listed above were prosecuted on laws that were already in place before SOX. Many studies have examined the effects of SOX on corporations in the past eleven years. The benefits are hard to quantify and the cost are rather hard to estimate including the ... Show more content on Helpwriting.net ... In terms of increasing independent directors in corporate governance, SOX directed the Securities and Exchange Commission (SEC) to adopt rules that prohibit listings of companies that did not have an audit committee. The audit committee must consist of independent directors, and if the committee is in place but did not have enough independent directors, it must add more independent directors to the board. In addition, at least one of the directors must be a financial expert as defined by the SEC. As for the liability of officers and directors, SOX expanded the scope of their legal obligation by increasing penalties for violating securities law and creating new crimes for certain acts which included securities fraud, obstruction of justice, and false certification of financial statements. This part of the SOX act actually modified the current laws that had been in place by increasing the penalties associated with civil and criminal violation of securities law. It also requires that all compensation in terms of bonus or incentive–based compensation and profit that is earned by executive officers be returned to the company if these laws are violated. To increase the disclosure requirement of publicly traded firms, the SEC requires that firms with a market value of $75 million or have to include a management assessment on the effectiveness of ... Get more on HelpWriting.net ...
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  • 19. Section 404 Sarbanes Oxley The Limitations of Section 404 of the Sarbanes–Oxley Act Darren Abraham MSAF 670 University of Maryland University College The Sarbanes–Oxley Act (SOX) is a legislation enacted in 2002 under the sponsorship of U.S. Senator Paul Sarbanes (D–MD) and U.S. Representative Michael G. Oxley (R–OH). The law introduced increased government oversight for publicly held companies. It also imposes additional management responsibilities and corporate operating costs on companies trading under SEC regulations. Sarbanes–Oxley was enacted in direct response to a number of corporate accounting scandals, including those of Enron, Tyco International, and WorldCom. As a result of the SOX Act, Corporate Managers (CEOs, CFOs) are ... Show more content on Helpwriting.net ... Unfortunately, all those efforts have not been vindicated because of the following reasons: Accounting did not cause the recent corporate scandals such as Enron and WorldCom. Unreliable financial statements were the results of management decisions, fraudulent or otherwise. To blame management's misdeeds on fraudulent financial statements casts accountants as the scapegoats and misses the real issue. Reliable financial reports rely to a certain extent on effective internal controls, but effective internal controls rely to a large extent on a reliable management system coupled with strong corporate governance. when management deliberately or even unlawfully manipulates business processes in order to achieve desirable financial goals and present untruthful financial reports to the public, accounting systems are abused and victims rather than perpetrators. An effective system of internal control must be built on the basis of the analysis of enterprise–wide risks. Therefore, to create value for its customers and other stakeholders, an organization must have in place the ability to systematically assess and analyze all material risks that affect the entity's planned objectives. (Integrated Framework, Volume II Guidance, June 2008). Internal control of the accounting process is designed to detect unintentional data errors rather than intentional errors. Garbage in, garbage out! Even good accounting systems can not catch ... Get more on HelpWriting.net ...
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  • 21. Essay on Case Study 2 Case Study Two Name Accounting and Finance 02Feb2011 Dear President of LJB Company, (1) If the LJB Company should decide to become a publicly traded company, a few internal controls should be implemented to comply with the Sarbanes–Oxley Act (SOX). * Management will need to provide periodic quarterly reports to evaluate the effectiveness and reliability of LJB's internal controls over financial reporting procedures. * Management should certify the accuracy and fairness of presentation of their financial statements. * Independent auditor(s) outside of LJB will need to attest to management's assessment of said internal controls. Additionally, non–audit services between these two parties (LJB and said independent auditor) ... Show more content on Helpwriting.net ... I recommend that these checks remain physically secured at all times (by the accountant, or by delaying delivery to the accountant until he reaches his office). * Due to the unorthodox honor system of dealing with petty cash, any single employee can withdraw a substantial amount of petty cash in relative anonymity. This violates two Internal Control Principles: Physical Control and Establishment of Responsibility. It violates the Physical Control Principle because the petty cash is easily accessible with no form of physical protection of theft, and it violates the Establishment of Responsibility Principle because no single person is in charge of the Petty Cash Fund (rather everyone is). This can be remedied by assigning a custodian to be responsible for the fund, as well as creating a secure area to store said funds. * These previous points additionally bring up another weakness, though not actually part of the Internal Control Principles. Though it seems to be LJB's unofficial policy to trust long–term employees, when a desirable opportunity to commit fraud/theft arises, it becomes at the discretion of the employee to commit these acts for their personal benefit. * Another weakness is LJB's lack of individual passwords which allows personnel to anonymously use the company computers and databases. This lack of individual accountability will prevent most attempts to track suspicious employee activities on company ... Get more on HelpWriting.net ...
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  • 23. Ljb Company Essay LJB Company: Internal Controls LJB Company: Internal Controls Contents Introduction 3 Internal Control Requirements 2 Strengths and Recommendations 2 Violations 3 Conclusion 4 Works Cited 4 Introduction LJB Company has asked the accounting firm to evaluate their system of internal controls because of the plan to go public in the near future. The president wants to be aware of any new regulations required of his company if they go public. The current system of internal controls was explained to the accounting firm. Under SOX Sarbanes–Oxley Act of 2002, all public traded U.S. corporations are required to maintain a sufficient system of internal controls. In order for this to be implemented all Corporate Executives and ... Show more content on Helpwriting.net ... One thing that the company may face is fraud and in order to reduce fraud, management has to create and build policies to address those specific risks. Strengths and Recommendations Since LJB Company is relatively small, they have an advantage over their competitors who are large companies. Being a small company due to its size of employees, one of the things they are doing right is being able to set expectations and implement those within the organization. As a smaller company, the accountant's decision to switch to pre–numbered invoices and the purchase of an indelible ink machine was a good idea and investment. The pre–numbered invoices will prevent transactions from being recorded multiple times. With the internal control system this will require that the employees forward their source documents for the accounting entries. The indelible ink machine will help organize all of the accounting duties. We recommended that LJB Company purchase an indelible ink machine to print all employees and cut checks. With the indelible ink machine this will make it difficult for unauthorized users to endorse checks and be approved. This will cut down on fraud and theft within the company. Violations LJB Company is very susceptible to fraud due the weaknesses and threats presented in the day to day operations. The type of threats include: no human resource control, lack of cash control, and no duties defined for each individual. LJB Company is lacking ... Get more on HelpWriting.net ...
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  • 25. Sarbanes Oxley Act Of 2002 (SOX) The Sarbanes Oxley act of 2002(SOX), also known as the public company accounting reform and investor protection act was enacted as a reaction to a number of major corporate and accounting scandals. These scandals occurred in Enron Corporation, WorldCom, Tyco International, Adelphia and Peregrine Systems. These companies and corporations were looking very financial sound and very attractive to investors. However the investors did not know that the success of these companies were cause by false reports and artificial profits. Which cost investors billions of dollars when their share prices of affected companies collapsed. Also inadequate accounting practices, bankruptcies, accounting irregularities and inefficient audit were part of these frauds ... Show more content on Helpwriting.net ... At the same time it provides certain protection for whistle–blowers. Title nine of sox is named "White Collar Crime Penalty Enhancement act of 2002." The White Collar Crime Penalty enhancement act of 2002 has a great significance because increases the criminal penalties associated with white–collar crimes and conspiracies. Collar crimes are various types of frauds and the most common are securities fraud, embezzlement, tax evasion and money laundering. Conspiracies are an agreement between people to commit any unlawful act. This means that they know the plan, and intend to break the law. I think this title is crucial because criminal punishment is implemented for those corporate officers who fail to certify corporate financial ... Get more on HelpWriting.net ...
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  • 27. Sarbanes Oxley Act Sarbanes–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 covers and sets new performance standards for boards of directors and managers of companies and accounting mechanisms of all publicly traded companies in America. It also introduces criminal liability for the board of directors and a requirement by ... Show more content on Helpwriting.net ... There is much more of an emphasis on training and certification of auditors to understand and be able to design processes that are in adherence to the SOX requirements (Michelman, Waldrup, 32, 33). These changes in accounting processes are just the beginning of the much broader and much more pervasive changes at the fundamental business level within companies. The changes required by SOX also force entirely new approaches to managing, reporting, sorting, and accessing financial information, often requiring new IT systems and processes as well. The coordination of IT systems and processes, accounting and reporting, and the definition of entirely new business processes are all happening at the same time in many publicly–held companies in the U.S. through even 2009. The exponential growth of Indian outsourcing companies who have expertise in Business Process Management (BPM) have correspondingly seen an increase in their business, as many smaller American publicly–held companies do not have the people or the expertise to get their processes, systems, IT plans and accounting and reporting functions in compliance with the SOX standard in any meaningful period of time (Radtke, et.al.) As a result, many accounting professionals also must manage outsourcing contracts with companies who specialize in BPM and SOX ... Get more on HelpWriting.net ...
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  • 29. Sarbanes-Oxley Act Summary The Sarbanes–Oxley Act was conceived by Senator Paul Sarbanes and Congressman Michael Oxley and signed into legislation by George W. Bush in 2002. The 11 titled Act became necessary when investors lost their confidence in days following the Enron, Arthur Anderson, and WorldCom fiascos. The purpose of the law is to provide board members, executives, auditors, attorneys, and directors with specific written duties and penalties for noncompliance and "to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws," as stated by the Act. The SOX has become known to many as the greatest security law since the Security Exchange Commission was formed in 1934. Title I consist of nine sections ... Show more content on Helpwriting.net ... This title consists of 9 sections that instruct in the behavior of auditing firms and establish guidelines for external auditor independence. It also sets restrictions for clients outside of auditing boundaries and requirements for audit partner rotation. Title III is Corporate Responsibilities. These eight sections state the financial and accounting responsibilities of public companies. They also issue that senior executives are held responsible for the completeness and accuracy for financial documents. Requirements for audit committees and limits and penalties for corporate officers are also included in the title. Nine sections of Enhanced Financial Disclosures make up title IV. These sections discuss the requirements for stock transactions, off–balance sheet transactions, enhanced reporting, and relationships with "unconsolidated entities. It requires audits and reports on all financial records and also sets internal control standards in relation to completeness and correctness of those documents. Title V consist of a section titled Analyst Conflicts of Interest. This title's purpose is to restore investor's confidence. This is done by setting rules and guidelines for the National Securities Exchanges and security ... Get more on HelpWriting.net ...
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  • 31. Sarbanes-Oxley Act Analysis Sarbanes–Oxley Act 2002 With the fall of Enron, WorldCom, and several other major corporations in the late 1990's, the need for transparency and accountability in accounting was brought to the forefront for investor's and board member's alike. Paul Sarbanes, a former senator from Maryland, and Mike Oxley, a former member of the House of Representatives from Ohio, together created what is now known as the most important legislation since the 1930's (Litvak, 2014). This bill, also known as the Public Company Accounting Reform and Investor Protection Act, changed the way companies that offer public securities did business. No longer would a publicly offered company get to create and govern its internal controls; they would now be regulated by ... Show more content on Helpwriting.net ... Many venture capitalistic companies did not or financially could not comply with the new regulations and requirements provided for in the act, so they took their companies to the private sector, no longer offering shares on the public exchange (Ecer & Kahlid, 2013). The main disadvantage to companies regarding SOX is Section 404, the internal controls portion of the act. The major complaint– the requirements of section 404 are "new, radical and ill–considered" (Gupta, Weirich, & Turner, 2012). The internal controls section requires companies to report on their internal control structure and procedures for financial reporting through annual audits, which for small companies is very costly. However, in 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act allowed for the permanent exemption of issuers with a market value of less than $75 million from the Section 404 of the SOX negating this disadvantage, at least for these non– accelerated firms. The additional time needed to implement the requirements of SOX caused issues as well, impacting those small firms the hardest. In addition, investors of foreign companies were not happy with the new regulations of SOX and an estimated loss of five to ten percent of market capital occurred (Litvak, ... Get more on HelpWriting.net ...
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  • 33. The Sarbanes-Oxley Act (SOX) Act Introduction: "... The era of low standards and false profits is over; no boardroom in America is above or beyond the law." (Bumiller) By way of landslide votes in both the U.S. House of Representatives and the U.S. Senate, in July of 2002, the Sarbanes–Oxley (SOX) act was approved. To understand the cause and effect of this landmark legislation, the SOX act warrants exploration of the events leading to its creation, the details of the act itself, and the impacts on responsibilities to both firms' management teams and their auditors. While the implementation of Sarbanes–Oxley has been positive for investors, company managers and auditors, specifically, are bearing the burden of complying with SOX through significantly greater responsibilities. ... Show more content on Helpwriting.net ... Andersen's reputation was so tarnished from the revelations of the conspiracy that no public company would have Arthur Andersen as an auditor. Andersen's practice was disbanded and has now become defunct with only a handful of employees still working for the firm as they continue to wind down the business. In July of 2002, not long after the exposure of the Enron accounting fraud and bankruptcy, WorldCom Inc. filed for Chapter 11 bankruptcy protection. WorldCom Inc. admitted that the company had fraudulently misclassified over $3.8 billion in payments for line costs as capital expenditures rather than current expenses (Beresford). The company's executives perpetrated this fraud, grossly overstating revenues by improperly transferring billions of dollars in line cost expenses to asset accounts over a number of years. These transfers reduced WorldCom's reported line costs and increased pre–tax income by $7 billion overall (Beresford). These two disgraceful accounting frauds by senior and executive managers at Enron and WorldCom, as well as similar events that took place at other public companies in the early to mid–2000s and the Arthur Andersen conspiracy were the genesis for the call of accounting reforms and auditor independence that would ultimately become the ... Get more on HelpWriting.net ...
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  • 35. Essay about Details of the Sarbanes Oxley Act 2002 An auditor's role in an audit is very important. An auditor must be able to collect enough evidence to supports their finding, and also be on the lookout for fraud. Company's may or may not know the law, but it is the job to know the law, and be able to educate and report findings properly. Since the Sarbanes–Oxley Act, there have been provisions that have directly affected auditors. This paper will include the details of the Sarbanes–Oxley Act, how ethics and independence have affected auditors, as well implementation of new standards based on the Sarbanes–Oxley Act. The Sarbanes–Oxley Act of 2002, provided changes in the regulations of the issuers in the public structures in the United States, as well as non–United States issuers. ... Show more content on Helpwriting.net ... Foreign private issuers must maintain internal control over financial reporting, and they must evaluate the effectiveness and changes of the internal control at the end of the company's fiscal year that may affect the financial reporting. The main goal of the Sarbanes–Oxley Act is to increase oversight over financial reporting and financial control (Cohen & Broadsky 2004). Ethics are a major issue which is a reason why the Sarbanes–Oxley Act was implemented. Before the Act, firms focused on growth but not as much on professional values. Revenue was the driving factor in auditing firms, and auditors were required to find new clients, keep existing clients, and cross selling. There were also penalties for not obtaining these requirements which could lead to termination (Jones III & Norman 2006). Since the Act many organizations have now implemented a code of conduct (ethics) which sets standards of how an auditor is supposed to act or a place to go to seek advice on handling different situations. The code of conduct or ethics can be viewed as a way an organization wants one to act or behave (Canary & Jennings 2007). Since implementation ethics is being taught more in college classes, and the reason for this is because of the huge scandals that have occurred. One study showed that the key leadership roles in a company often have a MBA, so teaching ethics will reach those leaders, and possibly prevent future ethical dilemmas (Sulivan, D. 2010). ... Get more on HelpWriting.net ...
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  • 37. Sarbanes-Oxley Act Essay THE LAW AND ITS HISTORY What is The Sarbanes–Oxley Act? "With more than half of all American households invested in U.S. public companies, the discoveries of financial reporting and auditing improprieties at Enron and numerous other public companies beginning five years ago swelled in 2002 to a national crisis in confidence in the integrity and reliability of public companies' financial statements and of external audits." This act of 2002 is a legislation passed by the U.S. Congress to guard shareholders and the general public against accounting errors and fraudulent practices in the enterprise, as well as improve the accuracy of corporate disclosures. SOX defines individual accountability and requires employees to construct an investigation of a business or person before signing a ... Show more content on Helpwriting.net ... Prior to the scandals, in addition to the unforeseen growth in household participation in the financial markets, there was a growing interest in equity markets globally. Then, of course, the Enron and other scandals revealed accounting failures by public companies and tainted the auditing profession – which investors understandably had thought was acting as their watchdog in attesting to the accuracy of the financial reports. Following the failure of Enron in December 2001, in the wake of accounting scandals at major corporations Adelphia, Peregrine Systems and others, Congress proposed legislation to reform the governance of public companies to make boards of directors, CEOs and chief CFOs accountable for corporate misconduct, according to Wikipedia. Sarbanes–Oxley makes employees at public companies individually responsible for providing true and accurate information about companies' financial statuses and practicing due diligence to secure proprietary information on investors, customers, and ... Get more on HelpWriting.net ...
  • 38.
  • 39. The Purpose of Internal Controls in the Accounting Process... Internal control is the specific procedures used within a company to safeguard its assets from employee theft, robbery, and unauthorized use and enhanc the accuracy and reliability of its accounting records by making fewer mistakes (Weygandt, Kimmel, and Kieso, 2008). There are six principles that are used throughout the industry as standards for such control. They are: 1. Establishment of responsibility 2. Segregation of duties 3. Documentation procedures 4. Physical, mechanical, and electronic controls 5. Independent, internal verification 6. Other controls The first of these controls, establishment of responsibility, is the assignment of responsibility to certain employees. It has been found that "control is most effective when ... Show more content on Helpwriting.net ... Independent, internal verification is basically audits within the same store, department, shipping dock, etc. Another person should verify that the information, money, or items that are reflected on the sales log, inventory sheet, or shipping manifest is accurate. It should be done at an unexpected time. There are some other forms of internal control that most companies use today that are somewhat effective. Bonding is a way to weed out employees who have wrong motives. Insurance companies insure employees who deal with cash for the purpose of protecting their asset. If a person has a criminal background for theft, this could be a red flag that the ability to steal from the company is a high ratio. An insurance company can say yes, but the employee knows that they will be prosecuted if they steal; and this can cause the employee to rethink that decision. Another way to safeguard a company's is by allowing employees to learn different areas of the company so that they are not able to develop a rhythm to devise a plan of theft. And, background checks are helpful in lessening the possibility of employee theft. Background checks provide lots of information on a person a company interviews. Use the information to make sound decisions on each person individually. Is there the possibility that this person would steal from the company? If the background check shows multiple arrests for ... Get more on HelpWriting.net ...
  • 40.
  • 41. Analysis of Two Themes: The Sarbanes Oxley Act and Telework 1) Sarbanes–Oxley The Sarbanes–Oxley act was enacted in 2002 as a United States federal law that changed the regulations and procedures of management and public accounting firms, and all U.S. public company boards. The act was created in response to the major scandals in corporate and accounting corporations. Sarbanes–Oxley over the years has implemented new sections and regulations. The act specifically requires that the management of public companies assess the effectiveness of the internal controls to ensure that it will not affect financial reporting (Kravitz, 2012). Section 404 of the Sarbanes–Oxley Act specifically requires "a publicly–held company's auditor to attest to, and report on, management's assessment of its internal controls". (Kravitz, 2012) This has helped many publicly companies (especially small ones) to improve their financial reporting and transparency. The Section 404 of the Sarbanes–Oxley Act brought about improvement and protection in companies at high cost; impacting mainly the smaller companies. Due to this, the Dodd Frank Act of 2010 granted some companies an exemption from Section 404 if they had less than $75 million in market capitalization (Amato, 2012 p.1–2). Dodd–Frank required the SEC to reevaluate the terms of Section 404 in two ways such as: Requiring the SEC to conduct a study on the burden caused by Section 404 compliance for companies with a market capitalization between $75 million and $250 million. And also required the SEC to ... Get more on HelpWriting.net ...
  • 42.
  • 43. Sarbanes Oxley Financial scandals have impacted many individuals such as public companies and accounting firms. Sarbanes Oxley has made many changes to many companies. The major financial scandals have impacted many investors and required more regulations to avert this problems. Sarbanes Oxley has tried to increase ethics in the upper management in many public companies. The upper management has tried to improve on social responsibility and increase the public view. There are many critics to Sarbanes Oxley and many different suggestions on improvements. History of Sarbanes–Oxley Act Scandals of many forms shape regulations in many aspects. The Sarbanes Oxley Act was a new regulation that was initiated because of financial scandals. Tyco, ... Show more content on Helpwriting.net ... Social Responsibilities Corporate social responsibility is an organizations' impact on society that goes beyond what is ethical. Being socially responsibility, an individual in upper management must realize how the actions might be able to influence the rest of the environment. If a company is socially responsible the company is honest, trustworthy, and display integrity while dealing with others and provides the attention to the stakeholders, build a community by searching for goals that are compatible with and respect individuals and accomplish silent triumphs. Some chief executive officers and chief financial officers had established policies in order to determine the corporate social responsibility by affecting the local community. Some individuals believe the corporate social responsibility can improve profits because it can promote respect for the company in the marketplace resulting in higher sales. A company can have corporate social responsibility in many manners such as treatment of employees, local community and increase ethical behavior within the company. If the upper management provides ethical behavior and is demonstrating to the employees and consumers it is a corporate social responsibility that is the most important. By respecting the Sarbanes–Oxley Act, the managers show the employees and the local community ... Get more on HelpWriting.net ...
  • 44.
  • 45. Ljb Company Case External Consultation to LJB Company EXTERNAL CONSULTATION TO LJB COMPANY Abstract A paper presented on the case study 2 review of LJB Company. The paper will address growing issues of Sarbanes–Oxley compliance, and business ethics in regards to Corporate Social Responsibility (CSR) and adherence to current regulatory federal mandates. Paper presents tools for consideration for tomorrow's leaders and gives a general overview of internal control strategies corporations take to limit legal responsibility in ethical/moral matters that include; matters of fraud mitigation, document retention, control activities, information/communication factors, monitoring, and assessing risk. This paper argues that ... Show more content on Helpwriting.net ... * Recommendation: Establish an Audit Committee to have oversight of accounting department. Findings reflect a lack of establishment of responsibility; including essential assignment of individuals that concludes an individual being responsible for a task, and another maintaining physical custody. This also includes the responsibility including authorizations and approval for transactions (Kimmel, Weygandt & Keiso, 2009). * Recommendation: Allow safe to be placed under physical control of an individual and independent person is identified to conduct physical security reports on the safe. The safe should be placed somewhere in which two individuals are required to access and lock, and record is maintained of access to the safe and checked by supervisor. Segregation is essential to the system of internal controls. Although LJB Company is streamlined for maximum efficiency some recommendations for segregation would be required prior to going public. * Recommendation: Allow for related activities to be assigned to different individuals such as receiving checks and conducting bank reconciliation. Physical custody ... Get more on HelpWriting.net ...
  • 46.
  • 47. The Sarbanes-Oxley Act In this paper, we will be discussing how Sarbanes Oxley has affected the American business and if it has accomplished its goals. The goal of the Sarbanes–Oxley Act (SOX) is to convey confidence in the stock exchange, but it does not defer all immoral activities that take place on the stock exchange. People no matter the law, are responsible for the quality of their work and are accountable for the integrity of themselves and their company. Their own ethical values can take precedence over those set by Sarbanes–Oxley. Not all values are equal in quality, and a person may go above the rules delegated by Sarbanes–Oxley, however, there is another side. Sarbanes–Oxley has created a fear among business practitioners that this new set of standards ... Show more content on Helpwriting.net ... Congress enacted the Sarbanes–Oxley (SOX) Act of 2002 to restore investor confidence by requiring public companies to strengthen corporate governance through several mechanisms, including enhanced disclosure on Internal Control Over Financial Reporting (ICFR). As claimed by regulators, the disclosures on the effectiveness of ICFR are aimed at improving the quality of financial reporting, which would, in turn, reduce the information asymmetry for investors in U.S. capital markets" (Donaldson). Sarbanes– Oxley named after its creators, Senator Paul Sarbanes, D– Md and Congressman Michael Oxley, R–Ohio. Enacted in 2002 with the purpose to crack down on corporate fraud. The implementation of Sarbanes–Oxley led to the creation of the Public Company Accounting Oversight Board (PCAOB) to oversee the accounting industry. It was created to eliminate corporate fraud, and it put in place a ban on company loans to executives while also giving job protection to whistleblowers. Before SOX was put into place the accounts were a self–regulated profession, such as medical professionals and lawyers. This is what led to the fraudulent actions of major institutions, people can be greedy, and they need checks and balances to ensure the fidelity of the firm. There are criminal enhanced penalties for corporate fraud and related misdeeds, this brings justice to the sector as well as working as a deterrent for additional immoral ... Get more on HelpWriting.net ...
  • 48.
  • 49. Sarbanes Oxley Act and the PCAOB Essay The Sarbanes–Oxley Act Overview: The development of the Sarbanes–Oxley Act (SOX) was a result of public company scandals. The Enron and Worldcom scandals, for example, helped investor confidence in entities traded on the public markets weaken during 2001 and 2002. Congress was quick to respond to the political crisis and "enacted the Sarbanes–Oxley Act of 2002, which was signed into law by President Bush on July 30" (Edward Jones, 1), to restore investor confidence. In reference to SOX, penalties would be issued to non–ethical or non–law–abiding public companies and their executives, directors, auditors, attorneys, and securities analysts (1). SOX significantly transformed the procedures in which public companies handle internal ... Show more content on Helpwriting.net ... Title I: Public Company Accounting Oversight Board: The PCAOB gives a new meaning to the public accounting industry. The board must be composed of five members, appointed for a 5–year term, two of which are Certified Public Accountants (CPAs) or have previously been CPAs, and three of which have never been CPAs. The chair of the PCAOB may be a CPA, but only if he has been out of practice for at least five years. "The members must be independent of the accounting profession as no member may, concurrent with service on the board, share in any of the profits of, or receive payments from, a public accounting firm, other than fixed payment such as retirement payments" (4). All members of the PCAOB must be appointed by the Securities and Exchange Commission (SEC). The board performs various jobs which include: "oversee the audit of public companies, establish audit report standards and rules, inspect, investigate and enforce compliance on the part of registered public accounting firms and those associated with the firms" (4). Not only do public accounting firms who audit the financial reports of public companies have to register with the PCAOB, but foreign public accounting firms must register as well. The standards of auditing include: A seven–year retention period for audits work papers, second partner review and approval, evaluation of whether internal control structure and procedures include records that accurately reflect transactions and dispositions of ... Get more on HelpWriting.net ...
  • 50.
  • 51. The Five Components Of Internal Controls In An Accounting... This paper sets out to define and really discuss what an internal control is and how it came to be. It will touch on what purpose an internal control serves to an Accounting Information System. This paper will look at the five components of internal controls that were created by COSO. It will provide a definition and example for each of these components. It also touches on some of the advantages and disadvantages that can occur when implementing an internal control system. The hope is this paper provides a better picture of just how important internal controls are for an organization to run efficiently and effectively. Keywords: Internal control, Accounting Information Systems, Fraud, Sarbanes–Oxley, Components This paper will be discussing Internal Controls in an Accounting Information System (AIS). We will be defining what an internal control is, what is its purpose and how it benefits entities. We will even touch on some of the problems that can occur with internal controls. There are five components that make up internal controls, they are Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. These components will be discussed in more detail as well, we will look at what each of these does and what purpose they serve. What are Internal Controls When talking about Internal Controls we should define what an Accounting Information System is. Accounting Information Systems are "a specialized subsystem of ... Get more on HelpWriting.net ...
  • 52.
  • 53. History of Sox History of Sarbanes Oxley and the Reasons for Enactment Virginia Knight Student ID: 6892460166 Accounting Capstone Senior Seminar in Accounting ACC 499 006016 Spring 2009 Submitted to: Professor Tee Thein June 19, 2009 Abstract: In 2002 the Sarbanes–Oxley Act was passed. This is a mandatory act that all organizations, large and small, must comply with. This legislation introduced major changes to the regulation of financial practice and corporate governance. There are eleven titles to the Sarbanes–Oxley Act. The act is named after its main architect, Representative Michael Oxley and Senator Paul Sarbanes. Former President Bush is quoted saying that it is intended to "deter and punish corporate and accounting fraud and ... Show more content on Helpwriting.net ... "The results noted a distinct difference between companies that had reached compliance with SOX and those that had not." CHAPTER 2 Eleven Titles of SOX The objective of the eleven titles of the Sarbanes–Oxley Act is to ensure that auditors remain independent; corporations and auditors are accountable to the public for the numbers they publish; an independent body governs financial reporting processes; sufficient measures are in place to deter fraudulent activity; financial activities are transparent enough to allow fraud detection to occur; and if fraud is detected, someone is held responsible. Public Company Accounting Oversights Board Section 101 of the Sarbanes–Oxley Act establishes the Public Company Accounting Oversights Board (PCAOB). The Board consists of five financially–literate members that are appointed for five–year terms. Three of these members must
  • 54. not be a CPA currently nor have been one in the past. The other two members must be, previously or currently, a certified public accountant. The main focus of this Board is (1) to register along with discipline accounting firms that prepare audit reports on companies that are public; (2) conduct inspections and/or investigations of registered accounting firms that audit public companies; and (3) establish audit and accounting standards. Auditor Independence Sections 201, 203 and 204 outline the ... Get more on HelpWriting.net ...
  • 55.
  • 56. Essay about Critique of the Effectiveness of the... Background George W. Bush called the SOX Act "the most far–reaching reforms of American business practices since the time of Franklin Delano Roosevelt". It has been a decade since the Sarbanes–Oxley Act became in effect. Obviously, the SOX Act which aimed at increasing the confidence in the US capital market really has had a profound influence on public companies and public accounting firms. However, after Enron scandal which triggered the issue of SOX Act, public company lawsuits due to fraud still emerged one after another. As such, the efficacy of the 11–year–old Act has continually been questioned by professionals and public. In addition, the controversy about the cost and benefit of Sarbanes–Oxley Act has never stopped. Introduction ... Show more content on Helpwriting.net ... Many SOX related studies have indicated that significant costs were incurred by "managerial diversion." This opportunity cost increased as managers diverted their attention to "designing, documenting and ensuring compliance with new internal controls" ( Ahmed, 2010). The following paragraphs explore how costly the overall SOX Act is for all the public companies to comply with it, since 2004; the key components of the direct SOX compliance costs; indirect costs associated with SOX Act; and SOX related costs specifically for small business and businesses with weak internal controls. Significant Compliance Costs in 2004 The SOX Act has always been described as "an endless list of compliance requirements" with no productive benefit (Hunter, 2007). Most of the costly compliance requirements are included in section 404 of SOX Act. "It's turned out to be a gorilla," said Charles Elson , "Its costs are phenomenal" (Quoted by Philadelphia Business Journal). Despite the unapparent recovery of investors' confidence, complaints about the greatly increased costs have been heard everywhere. Obviously, the complaints came from the affected companies. To comply with the requirements of section 404 of SOX which is related to internal control, audit firms need to spend much more on the testing of a company's internal control, the cost of which would certainly be passed on to their clients. In addition to increasing audit fees paid to auditors, more costs have been ... Get more on HelpWriting.net ...
  • 57.
  • 58. Essay on Internal Controls and the Sarbanes-Oxley Act Internal controls are in place to protect entities against theft from dishonest workers and outside predators. They are also an accurate series of checks and balances and are in place to find discrepancies. The Sarbanes–Oxley Act of 2002 (SOX) was named after Senator Paul Sarbanes and Michael Oxley. The Act has 11 titles and there are about six areas that are considered very important. (Sox, 2006) The Sarbanes–Oxley Act of 2002 made publicly traded United States companies create internal controls. The SOX act is mandatory, all companies must comply. These controls maybe costly, but they have indentified areas within companies that need to be protected. It also showed some companies areas that had unnecessary repeated practices. It ... Show more content on Helpwriting.net ... With technology today hackers can gain access into a company's system and retrieve information. Theft of company hardware is a limitation. A person can steal a company's computer hard drives that have valuable information stored on them and retrieve the information off them. There are four different ways to establish internal control. They are all effective methods. One is establishing responsibility. Establishing responsibility states that one employee should be responsible for doing a certain task. If one employee is doing a specific duty, there is a clear way of accountability. An employee is responsible for his or her cash register during that shift. When the shift ends the cash drawer can be counted. Other internal controls are physical, mechanical, and electronic. A company can physically safeguard the assets by hiring a security guard, putting them in a locked safe, or secure the assets in a locked warehouse. Mechanical and electronic controls consist of employees using a time clock to punch in and off work to ensure accurate time keeping of hours worked. A company can put sensors on items to prevent theft of merchandise or install alarms systems to prevent break ins. Segregation of duties is an internal control. Segregation of duties allows two employees to be ... Get more on HelpWriting.net ...
  • 59.
  • 60. The Sarbanes-Oxley Act (SOX) Act Introduction: "... The era of low standards and false profits is over; no boardroom in America is above or beyond the law." (Bumiller) By way of landslide votes in both the U.S. House of Representatives and the U.S. Senate, in July of 2002, the Sarbanes–Oxley (SOX) act was approved. To understand the cause and effect of this landmark legislation, the SOX act warrants exploration of the events leading to its creation, the details of the act itself, and the impacts on responsibilities to both firms' management teams and their auditors. While the implementation of Sarbanes–Oxley has been positive for investors, company managers and auditors, specifically, are bearing the burden of complying with SOX through significantly greater responsibilities. ... Show more content on Helpwriting.net ... Andersen's reputation was so tarnished from the revelations of the conspiracy that no public company would have Arthur Andersen as an auditor. Andersen's practice was disbanded and has now become defunct with only a handful of employees still working for the firm as they continue to wind down the business. In July of 2002, not long after the exposure of the Enron accounting fraud and bankruptcy, WorldCom Inc. filed for Chapter 11 bankruptcy protection. WorldCom Inc. admitted that the company had fraudulently misclassified over $3.8 billion in payments for line costs as capital expenditures rather than current expenses (Beresford). The company's executives perpetrated this fraud, grossly overstating revenues by improperly transferring billions of dollars in line cost expenses to asset accounts over a number of years. These transfers reduced WorldCom's reported line costs and increased pre–tax income by $7 billion overall (Beresford). These two disgraceful accounting frauds by senior and executive managers at Enron and WorldCom, as well as similar events that took place at other public companies in the early to mid–2000s and the Arthur Andersen conspiracy were the genesis for the call of accounting reforms and auditor independence that would ultimately become the ... Get more on HelpWriting.net ...
  • 61.
  • 62. Essay about The Loss of Ethics and Trust in Corporations... Something that is widely down spread due to some of the current allegations within corporations is ethics and trust. Many individuals including myself look at shows such as Cops and Cheaters as drama and action but it is merely nothing more than ethics and trust right in front of our eyes. The effects of our daily lives not only affect us but so many others. I remember during high school that Enron, a huge corporation at the time, wasn't doing so well and yet they had "cooked the books". That means that basically that they were forging and falsify their records to perceive as if they were being successful. It is easy now to look back on it and say the company did it to seem attractive for potential investors. We know the outcome of their ... Show more content on Helpwriting.net ... The internal controls were correctly monitored within the previous ninety days and have been reported on their findings. We must have a list of all deficiencies in the internal controls and information on any fraud that involves employees who are involved within the internal activities. The report must also include any major noteworthy changes in internal controls that could have a negative impact on the internal controls. (Barth, 2012) Section 401 includes disclosers in the periodic reports. Financial statements which are published by issuers are required to be accurate and presented in a manner that does not falsify or not disclose any significant state material. These financial statements shall also include all out of balance obligations or transactions. The Commission was required to study and report on the extent of off–balance transactions resulting transparent reporting. The Commission is also required to determine whether generally accepted accounting principles or other regulations result in open and meaningful reporting by issuers. (Barth, 2012) Section 404 is what many refer to as the most complicated, most contested, and most expensive to implementation of all the Sarbanes Oxley Act sections. "All annual financial reports must include an Internal Control Report stating that management is responsible for an "adequate" ... Get more on HelpWriting.net ...
  • 63.
  • 64. ACCT 504 Case Study 2 Internal Controls: Requirements and Recommendations for LJB Company Prepared For: LJB President Prepared By: February 5, 2013 Table of Contents Introduction............................................................................................3 Internal Control Requirements for Publicly Traded Companies................................3 Current Strengths in Internal Controls..............................................................4 Current Weaknesses in Internal Controls.........................................................6 Summary and Conclusion.............................................................................8 Bibliography.........................................................................................10 Introduction LJB Company inquired about new internal control regulations required if they choose to go public. This report will discuss the regulations ... Show more content on Helpwriting.net ... 341). By using pre–numbered invoices, LJB Company is able to have a more reliable method of recording transactions. The accounting department can ensure that transactions are not duplicated or overlooked. Kimmel, Weygandt, & Kieso (2013) suggest, "this control measure helps to ensure timely recording of the transaction and contributes directly to the accuracy and reliability of the accounting records" (p. 341). The internal control of physical controls is also being utilized by LJB Company. Physical controls "relate to the safeguarding of assets and enhance the accuracy and reliability of the accounting records" (Kimmel, Weygandt, & Kieso, 2013, p. 342). The accountant secures the paychecks in a safe in his office before he leaves for weekend. By securing the paychecks in the safe, other individuals are unable to get to the checks during the weekend. Although there are improvements that need be made to the paycheck process, locking the paychecks in a safe over the weekend is a strong internal control that protects a valuable asset. LJB Company should buy the indelible ink machine in order to reduce fraud and theft. The indelible ink machine would prevent others from altering checks once they were printed. The purchase of the ink machine would involve the internal control principles of physical controls, segregation of duties, and establishment of responsibility. The ink machine would ... Get more on HelpWriting.net ...
  • 65.
  • 66. The Implications of the Sarbanes Oxley Act on the... The Implications of the Sarbanes Oxley Act on the Accounting Profession Abstract On July 30, 2002, the Sarbanes Oxley Act (also known as SOX) was signed into law by President George W. Bush. The Sarbanes Oxley Act of 2002 is a federal law that set new or improved standards for all U.S. public company boards, management and public accounting firms. Covered in the eleven titles are additional corporate board responsibilities, auditing requirements and criminal penalties. This essay reviews the implications of the Sarbanes Oxley Act on the accounting profession. The Implications of the Sarbanes Oxley Act on the Accounting Profession President George W. Bush signed the Sarbanes Oxley Act into law on July 30, 2002. ... Show more content on Helpwriting.net ... Section 802 specified fines up to as much as five million dollars and up to twenty years imprisonment, or both. Section 1107 mentions fines and up to ten years imprisonment for any harmful actions retaliated toward whistleblowers (FindLaw, 2002). External auditors (only those registered with the Public Company Accounting Oversight Board) were required to review these financial statements and issue opinions on the accuracy of the financial reports and whether effective internal ... Get more on HelpWriting.net ...
  • 67.
  • 68. Swot Sarbanes Oxley Act of 2002 The Sarbanes–Oxley Act of 2002 is a United States federal law enacted on 30th July 2002, also known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly called SOX or Sarbox. This law was passed in response to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of the affected companies collapsed, shook public confidence in the nation 's securities markets. Named after the sponsors Senator Paul Sarbanes of the Democratic party of Maryland and Representative Michael G. Oxley of the Republican party of ... Show more content on Helpwriting.net ... Given that the professional costs and managerial time varies little with company size, small and mid–sized companies must allocate a higher percentage of revenue to SOX compliance (Morgenstern and Nealis, 2004). Many of these firms have considered such measures as reverse stock splits to shrink the company to a size below that required to meet SOX's strictest requirements, or have considered delisting the company. According to Wharton School study, most companies de–listed their shares in an attempt to avoid the high costs of complying with the SOX Act, with some smaller companies listing costs of as high as $500,000 to comply. Some companies, however, de–listed to avoid outside monitoring and scrutiny, leading the study's authors to suspect that firms were not being managed in the most efficient way or that their compensation was excessive. The study found that some of the firms with "higher free cash flow and lower–quality accounting" were more likely to "go dark" – to deregister from the SEC and become private firms (AP, 2004). Independence of board members may also place hardships on smaller companies. Many publicly listed small companies have few board members, and the chief financial officer may act in the capacity of other positions. Smaller firms may not have the resources necessary to recruit qualified individuals to meet independence requirements. ... Get more on HelpWriting.net ...
  • 69.
  • 70. Essay on Sarbanes-Oxley Section 404 and Affect on Small... Analysis of Sarbanes–Oxley – Section 404 And Affect on Small Companies Content I. Executive Summary 1 II. Background Facts 2 III. Issue Stated 3 IV. Analysis 4–5 V. Conclusion 6 VI. References 7 Executive Summary 404 of Sarbanes Oxley: It's affect on small business. The implementation of section 404 of Sarbanes–Oxley's has presented challenges for many U.S businesses. The implementation rules and guidelines have imposed significant cost and time restraints. Small ... Show more content on Helpwriting.net ... Senate action.[18] The PCAOB intends to issue further guidance to help companies scale their assessment based on company size and complexity during 2007. The SEC issued their guidance to management in June, 2007 The most visible argument is that small companies should not have to shoulder the same compliance burdens as large companies do, simply because they can't afford to. But that premise is being challenged by studies, derided by a number of commentators and viewed with public skepticism even by some SEC Commissioners. It assumes that were money no object, small and large companies should be regulated the same. If that assumption is true, then any argument for relaxed compliance that hinges on expense is vulnerable. Cost seldom satisfies as a reason for not doing something that ought otherwise be done.
  • 71. However, it is wrong to assume that the main difference between small and large companies is how much money they have. Large and small companies play very different roles in the national economy and in the minds of investors. The very large companies really are different than their smaller brethren, and not just because they have more money. According to the Chicago–based law firm's study, public companies with more than $1 billion in annual revenue spent an average $10 million on ... Get more on HelpWriting.net ...
  • 72.
  • 73. The Sarbanes Oxley Act In the begging of 2000's after a period of corporate scandals involving large public companies, senate enacted the Sarbanes–Oxley Act, which is referred to as SOX or Sarbon. The act was enacted 14 years ago on July, 30 2002. Also this act was known as the "Public Company Accounting Reform and Investors Protection Act of 2002." There are many serious accounting and corporate scandals that influenced companies Tyco International, Global Crossing, Enron, WorldCom. For instance the bankruptcy of "ENRON" in 2001 was the one of largest bankruptcy in the U.S. history. That time investors lost $74 billion and thousand employees losing their jobs, retirement savings and medical plans. The time during the scandals happened, where the mentioned ... Show more content on Helpwriting.net ... The study of their complicated cases made to create new public demand for reform. Before the congress enacted this act, there were dozens cases of auditor conflicts of interest. SOX gives public companies new, exact and limited derectives. Prior to SOX auditing companies, accounting profession, chief financial supervisors from investors side were largly self–regulated. They also performed essential consultancy or not related to audit work for the companies they performed to audit. All consulting services were based on agreements many of which were far more profitable for auditors than that of the auditing services provided. This is factual representation of the conflict of interest. There were also problem in board. Board members also involved in scandal. Boards of Directors, especially Audit Committees, are made some mechanisms were financial reporting parts for investors were oversight. They either didn't perform their obligations, responsibilities or didn't understand business complex duties to perform their work. Audit Committee members were much dependent on management as should be and they were not perform independent decisions. Stock market analysts, who make decision buy or sell company bonds and stock, and investment bankers that give companies loans or handle mergers and acquisition are another conflict. Banking practices conflict leading to a firm lends ... Get more on HelpWriting.net ...
  • 74.
  • 75. Lge 500 Week 10 Discussion 1&2 Essay "Underlying Causes" Please respond to the following: Analyze at least three underlying causes for the creation of the Sarbanes–Oxley Act. Next, rank the causes that you have analyzed from the most important to the least important to the creation of the Act. Explain your rationale. In the later part of 1990s, there was an epidemic of accounting scandals which arose with the disclosure of financials transgressions by trusted corporate executives. The misdeeds involved misusing or misdirecting funds, understating expenses, overstating the value of corporate assets or underreporting the existence of liabilities, and overstating of revenues. Some of the companies involved in the creating accounting practice in the late 1990s and early ... Show more content on Helpwriting.net ... There were a lot of pointing fingers in the accounting scandals that plagued the economy in the 1990s within the companies involved. Congress decided to hold the CEO and CFO responsibility for any financial misreporting. This made the third most important causes of creating SOX. Determine three most important provisions of the Sarbanes–Oxley Act. Provide a scenario or example of each to justify why each provision that you determined is important Sarbanes–Oxley was motived by the never–ending waves of corporate financial scandals by Enron, Arthur Andersen, WorldCom, Waste Management, Global Crossing etc. There are 11 sections in the act. There following are the three (3) most important provision in the Sarbanes Oxley Act due to the simple fact that The US Congress were trying to enact a law to combat corporate fraud and misleading of investors: The three (3) most important provisions of Sarbanes–Oxley include: * Creation of PCAOB * Auditor independence and a prohibition on audit firms offering value–added (read "conflict of interest") services * Certification of financial reports by CEOs and CFOs First, Congress saw the need to create an independent body to oversee the audit of public companies that are subject to the securities laws. PCAOB was established to protect the investors and further the public interest in the preparation of informative, accurate, and independent audit reports for public companies. Before the SOX, The ... Get more on HelpWriting.net ...
  • 76.
  • 77. Sarbanes Oxley Act Research Paper Sarbanes Oxley Act Research Project Brielle Lewis MBA 315 March 6, 2014 I. Abstract The purpose of the Sarbanes–Oxley Act is to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities law, and for other purposes. (Lander, 2004) The Act created new standards for public companies and accounting firms to abide by. After multiple business failures due to fraudulent activities and embezzlement at companies such as Enron Sarbanes and Oxley recognized a need for the revamping of our financial systems laws, rules and regulations. Thus, the Sarbanes–Oxley Act was born. II. Background/Purpose The Sarbanes Oxley Act was signed into law on July 30, 2002 by then President ... Show more content on Helpwriting.net ... (Green, 2004) IV. Requirements for Publicly Traded Companies Public companies issuing securities, public accounting firms, and firms providing auditing services whether they are domestic or foreign must comply with Sarbanes–Oxley. (Sarbanes–Oxley Act Section 404, 2002) Additionally, publicly traded companies with a market capitalization greater than $75 million must comply with these new rules. (Don E. Garner, 2008) A company's management is required to provide an external auditor with all financial statements for the current review period. Upon reviewing these statements the auditor issues a report classified as unqualified, unqualified with explanation, qualified, adverse, or disclaimer based on what they find or do not find. All public companies reports are available on the Securities Exchange Committees website, below is a sample of what this report looks like. You can imagine what a relief this was for investors, to be able to search any company and find statements solidifying their prospective investment. Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of McDonald's Corporation We have audited the accompanying consolidated balance sheets of McDonald's Corporation as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ... Get more on HelpWriting.net ...
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  • 79. Sarbanes-Oxley Act 2002 The Sarbanes–Oxley Act of 2002 (often shortened to SOX) is legislation passed by the U.S. Congress to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise, as well as improve the accuracy of corporate disclosures. The U.S. Securities and Exchange Commission (SEC) administers the act, which sets deadlines for compliance and publishes rules on requirements. The Sarbanes–Oxley Act was enacted in response to a series of high–profile financial scandals that occurred in the early 2000s at companies including Enron, WorldCom and Tyco that rattled investor confidence. The act, drafted by U.S. Congressmen Paul Sarbanes and Michael Oxley, was aimed at improving corporate governance and accountability. ... Show more content on Helpwriting.net ... Chief legal counsel for companies of all sizes will follow the proceedings closely, watching the jury's deliberations and gauging its reaction to the prosecution. (Longnecker, 2004). Passed in the wake of last year's corporate accounting scandals, the Sarbanes–Oxley Act requires public companies to disclose more financial information than in the past, and it holds corporate directors and officers more accountable for the accuracy of disclosures than ever before. Sarbanes– Oxley also requires companies' top officers to assess and certify the effectiveness of the internal controls they use for financial reporting. Some of the Sarbanes–Oxley requirements aren't entirely clear, and the Securities and Exchange Commission, which implemented the law, hasn't been all that helpful. In comments on section 404, the SEC ruled that beginning with a company's fiscal year ending on or after June 15, 2004, it must issue four statements: one indicating management's responsibility for maintaining internal controls; one identifying the framework used to evaluate internal controls; one saying the company's auditor attests to management's assessment; and one assessing the effectiveness of internal–reporting ... Get more on HelpWriting.net ...