Fraud : The Sarbanes Oxley Act Essay

Fraud : The Sarbanes Oxley Act Essay

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In the early 2000s, fraud was a major issue that was becoming more and more frequent. In an attempt to dissuade frauds, the government passed the Sarbanes Oxley Act, created the Public Company Accounting Oversight Board, and issued the Statement of Auditing Standards 99. These costly reforms sought to improve financial disclosures from organizations, establish audit standards, inspect accounting firms, and enforce compliance with all rules highlighted by the Sarbanes-Oxley Act. However, fraud occurrence has not been impacted. Fraud, at its core, has three factors that are present in every case. These three factors are shown in Donald Cressey’s fraud triangle as opportunity, incentive, and rationalization. Fraudsters must have the opportunity to commit a fraud. It could be possible due to poor or effective internal controls where a manager has the ability to override. A fraudster must have an incentive to commit a fraud. Incentives could include meeting analysts projections and stockholder expectations, reaching goals for company performance bonuses, raising stock price for personal stock options in the company. The governmental reforms of the early 2000s attempted to limit frauds through these two aspects of the fraud triangle. Since frauds still continue to occur, the rationalization aspect may be the largest part of the problem.
Written by Douglas M. Boyle, CMA, CPA, James F. Boyle, CPA, and Daniel P. Mahoney, CPA, CFE, “Avoiding the Fraud Mind-Set” outlines the following learning objectives that address the rationalization element of the fraud triangle: develop an ability to recognize your own human tendency toward rationalization, understand that fraudsters are “real people”, realize the psychological cost of “getting away ...


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...lose personally with Jeffrey Skilling, Enron’s CEO at the time. Upon Enron’s eventual bankruptcy, Skilling noted that Baxter was heartbroken by what had happened to Enron and all of the employees who lost their jobs and life savings. He was sued personally and former employees along with the media publicly slandered his name. Knowing his role in the fraud, Baxter could not take it anymore. Seven months after his resignation from Enron, Baxter was found dead in his Mercedes because of a self-inflicted gunshot wound to his head. He left behind a suicide note to his wife reading:
“Carol,
I am so sorry for this. I feel I just can 't go on. I have always tried to do the right thing but where there was once great pride now it 's gone. I love you and the children so much. I just can 't be any good to you or myself. The pain is overwhelming.
Please try to forgive me.
Cliff”

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