History Of Sarbanes Oxley Act Of 2002 Essay

History Of Sarbanes Oxley Act Of 2002 Essay

Length: 1864 words (5.3 double-spaced pages)

Rating: Better Essays

Open Document

Essay Preview

History of The Sarbanes-Oxley Act
The Sarbanes-Oxley Act of 2002(SOX) is a United States federal law. This act was signed into law on July 30, 2002, in response to several corporate scandals that went on in the early 2000s. The scandals included corporations such as ENRON, Worldcom, and Tyco. In the mid-90s, the economy was flourishing. Stock averages rose at increasing rates. New technological advancements and changes in investing brought millions of people and their savings into the stock markets for the first time. However, in the second quarter of 2000, the bubble burst. Stock prices plummeted. Investors fled the markets. The IPO market disappeared. This downturn affected many individuals because it was their savings that they had invested in the stock market. As all of this unfolded, it became apparent that there had been fraud, misconduct, and a serious erosion of business principles.
A prime example of this was in the case of ENRON. ENRON was an energy company based out of Texas. ENRON applied for deregulation, which allowed ENRON executives to have agency over the earnings reports that were released to investors and employees. As a result of this, they were able to misrepresent earnings reports. They did not illustrate losses in their entirety. People were willing to invest their money in ENRON because it appeared as though the company was profitable and a secure investment. However, the executives of ENRON were actually pocketing the money that they had received from unsuspecting investors. They were using money that was supposed to be for the company for their own personal use instead. As a result of the actions of the executives, ENRON went bankrupt. Investors lost more than $70 billion. It also cost trustees and emp...


... middle of paper ...


...-Oxley Act has helped affect the changes that it was enacted to affect. The studies show that the results have been excellent when it comes to restoring investors’ faith in corporations, as well as improving the business ethics of corporations. It has increased the accountability expectations we have of executives, officers, and their legal and accounting advisers. There is decreased tolerance for corporate misconduct and there are checks and balances in place to prevent it from taking place on a large scale. The act has also put procedures in place to protect employees that are trying to do the right thing by reporting financial discrepancies from retaliation by their employer or fellow employees. Research suggests that the number of restatements will continue to decrease as they have been, and compliance with the act will continue to rebuild the trust of investors.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Essay on 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....   [tags: auditor, sarbanes oxley act, auditing]

Better Essays
1056 words (3 pages)

Essay on The Sarbanes Oxley Act Of 2002

- Ethicality, or the lack of, plays a large part in the broad spectrum of business. It is the duty of every business person to conform to a certain code of ethics. Because of scandals in regard to ethicality, such as Enron, WorldCom, and TYCO, The Sarbanes-Oxley Act of 2002 was passed in order to create a better system of promoting and supervising the ethicality of all businesses and their employees. “In compliance with the Sarbanes-Oxley Act of 2002, in 2003 the NYSE (2009) and the NASDAQ (2009) issued new corporate governance rules that require their listed companies to adopt and disclose a code of business conduct and ethics....   [tags: Ethics, Business ethics, Corporate governance]

Better Essays
1012 words (2.9 pages)

The Sarbanes Oxley Act Of 2002 Essay

- The field of financial reporting tends to bore many people, until it makes the front page in a typically catastrophic fashion due to one scandal or another. While we are happy ignoring the important accounting function of reporting and auditing while that function works properly, as soon as it fails, we turn on corporations and the accountants that keep them running to call for justice and perhaps reform. Today, the accounting practices of publically-traded companies are governed by numerous regulations and requirements, among them the Sarbanes-Oxley Act of 2002 (SOX), a piece of legislation introduced following a number of headline accounting scandals at companies like Enron and WorldCom (H...   [tags: Internal control, Auditing, Audit]

Better Essays
851 words (2.4 pages)

Essay on The Sarbanes Oxley Act Of 2002

- With increasing frequency; the news is reporting many new fraud investigations and cases. The positive side of these fraud reports shows that people are getting caught. Many times it takes years of fraudulent activity to occur before the individual is caught. Billions of dollars are lost by companies and individuals every year. However; in more recent years, companies and individuals are learning more about how and why fraud occurs. For a company; the Sarbanes-Oxley Act of 2002; has aided in the detection of fraudulent activity (Bumgardner, 2003)....   [tags: Criminal law, Jury, Trial]

Better Essays
1383 words (4 pages)

The Sarbanes Oxley Act Of 2002 Essay

- In addition to internal control reform, the Sarbanes-Oxley Act of 2002 (SOX) redefined governance requirements for U.S. reporting companies. SOX provided for stricter requirements of the audit committee by enhancing the board’s responsibilities. The audit committee is directly responsible for appointing and overseeing the work performed by a company’s external auditor. In addition, because the audit committee is required to communicate closely with the external auditors, the committee is required to have independent members of the board of directors as well as to appoint a financial expert....   [tags: Internal control, Auditing, Audit]

Better Essays
1144 words (3.3 pages)

Sarbanes Oxley Act Of 2002 Essay

- Sarbanes–Oxley Act Sarbanes-Oxley Act of 2002 Long title 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. Nicknames Sarbanes-Oxley, Sarbox, SOX Enacted by the 107th United States Congress Citations Public law Pub.L....   [tags: U.S. Securities and Exchange Commission]

Better Essays
1027 words (2.9 pages)

Essay about The Sarbanes-Oxley Act of 2002

- The Sarbanes-Oxley Act of 2002 is the most significant Federal law that impacts public companies to be introduced since the Securities Acts of 1933 and 1934. This legislation set new or enhanced standards for all U.S. public company Board of Directors, top management, and the public accounting firms that audit public companies. The Sarbanes-Oxley Act of 2002 (“SOX”) was introduced in response to a number of accounting scandals around the turn of the millennium, including Enron, Tyco, and WorldCom....   [tags: United States federal law]

Free Essays
601 words (1.7 pages)

Sarbanes Oxley Act Of 2002 Essay

- . The Sarbanes-Oxley Act of 2002 was created to protect investors from potential fraudulent activities from corporations (The Data Governance Institue). The Sarbanes-Oxley was created after issues such as Enron occurred. The motivation of this act was to hold CEOs and other corporation officials responsible and of the financial situations their company was in. The idea that corporations would record false number with their financial results was not only dishonest, but would cost the stakeholders a great amount of money (The Data Governance Institue)....   [tags: Information security, Computer security, Security]

Better Essays
824 words (2.4 pages)

Sarbanes-Oxley Act of 2002 Essay

- Ethics continues to be a hot issue in the business world. The focus on business ethics grew after several significant business scandals beginning in the millennium. These scandals prompted the government to pass new accounting regulations to increase the control and accuracy of financial reporting. A prominent piece of legislation is the Sarbanes-Oxley Act of 2002, which applies to publicly traded businesses. The basis of Sarbanes-Oxley is to increase the reliability and accuracy of financial reporting (Noreen)....   [tags: Business Ethics]

Better Essays
1353 words (3.9 pages)

The Sarbanes Oxley Act of 2002 Essay

- H.R.3763 - The Sarbanes-Oxley Act of 2002 A lot has been made, perhaps without justification, of the July 30, 2002 passage of H.R. 3763, The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley" or The Act). Having read the Act, I suspect that the great praise is unfounded. I intend to address three issues presented within the act. First, I will address stock options as considered (or neglected, as the case may be) by Sarbanes-Oxley. Second, I will address the creation of a Commission designed to oversee audits and corporate accounting practices, and the potential efficacy of this Commission....   [tags: essays research papers]

Better Essays
1464 words (4.2 pages)