The Sarbanese-Oxley Act and Its Importance in Business
1114 Words5 Pages
If corporate America learned anything in 2001, it was that looks can be deceiving- and also financial statements. In early 2001, Enron was highly regarded as one of the most competitive energy companies in its sector. By December of 2001, Enron collapsed; filing for bankruptcy and eventually losing it’s investors over sixty-three billion dollars, and not to mention the loss of thousands of employee pensions and/or 401 K. This gigantic fallout of Enron was a result of a series of fraudulent transactions stemming to falsifying financial documentation. Unfortunately for the US public and investors, Enron was not acting alone; many companies were found to taking part in similar fraudulent activity. The result of evident Corporate Fraud in America was devastating to the economy. Specifically, the corporate scandals of Enron and such left America’s investors in a crisis of lost confidence; as well as devastating monetary losses to stakeholders across the nation.
The United States Government knew that an investor lack of confidence could hinder or slow the US economy, and because of this took measures to act quickly. Just seven months after the biggest corporate scandal in American history, President Bush signed into law the Sarbanes-Oxley act of 2002 (2002), as well known to be The Public Company Accounting Reform and Investor Protection Act of 2002. The quick and determined passage of this law greatly related to the unethical business practices of company executives, such as falsifying financial transactions and/or documents. The Sarbanes-Oxley act created several reforms in the business world, such as strict penalties for wrong-doing, and new standards for accountability in corporate auditing and financial reporting. T...
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...xample, before Sarbanes-Oxley, a pathetic ONE percent of analysts would recommend investors to sell asset shares. Just 2 years after SOX, the number was past 20 percent! (Forbes). In just 2 years, the asset sell rating spiked over 2,000%; this represents a collective impact of both corporate executives, and auditors/regulators toward a more ethical and responsible business environment. Before Sarbanes-Oxley passage in 2002, many executives and analysts would have no incentive to report a sell rating, and just continue to bask in greed. In just two years, the new strict penalties of Sarbanes-Oxley evidently already leveled the playing field. This statistic is just one impact of several that Sarbanes-Oxley has left upon the business world. I would like to individually briefly discuss the 11 requirements of Sarbanes-Oxley compliance, and the resulting impact.