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...
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...-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.
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