Sarbanes-Oxley Act

Sarbanes-Oxley Act - Running head SARBANES-OXLEY ACT 1 Sarbanes-Oxley Act Debra Satterwhite COM 220 August 01-2010 Veronica Richardson

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Running head: SARBANES-OXLEY ACT 1 Sarbanes-Oxley Act Debra Satterwhite COM 220 August 01-2010 Veronica Richardson
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SARBANES-OXLEY ACT 2 Sarbanes-Oxley Act Legislation created the Sarbanes-Oxley Act of 2002 because of the collapse of Enron and fraudulent activities in the internal control and audit accounting systems. In addition, laws created were to prevent future scandals in large corporations and businesses and the accounting professions. These laws passed were to provide businesses and investors with accurate, trustworthy, and honest information on financial reports. These laws produced regulations and penalties for fraud and dishonesty and failure to produce accurate information. The main goal of the Sarbanes-Oxley law was to restore the trust that investors lost from fraudulent information on financial reports, which did indeed cause investors and stockholder to lose millions, even their lives savings and retirement funds. However, in the process of creating the Sarbanes-Oxley Act, legislation produced costly oversights and regulations on all companies without knowing the devastating effects these laws would have on small businesses. The Sarbanes-Oxley laws ensure all businesses pay with costly laws and regulations that could lead to devastating financial hardships for small companies. The Sarbanes-Oxley act, also known as SOX, contains 90 sections and 300 laws, which has 11 titles and 66 subtitles. Susan Hunnicutt, (2007) stated, “The Sarbanes-Oxley Act of 2002, and the rules it produced, was the first major federal securities legislation since 1934.” Two people responsible for constructing the act are, Representative Michael Oxley, and Senator Paul Sarbanes. The Sarbanes-Oxley Act named in honor of these the two men. In July 2002, this act produced a great deal of changes relating to financial practice and rules of corporate authority. This law also produced stiff penalties, and fines, and stricter financial reporting. In some cases, one could serve up to 20 years in prison for fraudulent acts. Section
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SARBANES-OXLEY ACT 3 802 of the SOX act contains the punishments for fraudulent acts. “This section is listed within Title VIII of the act (Corporate and Criminal Fraud Accountability)” (Addison-Hewitt, 2006). However, section 404 is the main concern because it is very costly to small businesses. Section 404 of the Sarbanes-Oxley act contains costly oversights and regulations for small businesses that have to comply with the law. Christopher Cox, (2007), chairperson for the United States Securities and Exchange Commission, testified before the committee and stated, “. ..the cost of regulation falls heaviest on smaller companies.” The reason is small businesses; to comply with federal regulation and SEC, spend more for each employee than large companies do. This is only one of the costly factors relating to section 404. The Sarbanes-Oxley Act assembled by legislation, came together in a hurry.
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This note was uploaded on 01/11/2011 for the course COM 220 taught by Professor Unknown during the Summer '08 term at University of Phoenix.

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Sarbanes-Oxley Act - Running head SARBANES-OXLEY ACT 1 Sarbanes-Oxley Act Debra Satterwhite COM 220 August 01-2010 Veronica Richardson

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