Sarbanes Oxley Act of 2002 - Sarbanes Oxley Act Running...

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Sarbanes Oxley Act 1 Running head: SARBANES OXLEY ACT OF 2002 Sarbanes Oxley Act of 2002 Victoria M. Crow Strayer University Advanced Accounting Professor: Dr. Monica Hubler November 20, 2010
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Sarbanes Oxley Act 2 Sarbanes Oxley Act of 2002 The Sarbanes Oxley Act of 2002 is the product of co-sponsors Senator Paul Sarbanes of Maryland and Representative Michael G. Oxley of Ohio. The Sarbanes Oxley Act, also known in the Senate as the “Public Company Accounting Reform and Investor Protection Act” and in the House as the “Corporate and Auditing Accountability and Responsibility Act” is also commonly called Sarbanes–Oxley, Sarbox or SOX. It is a United States federal law that was enacted on July 30, 2002, which set new or enhanced standards for all U.S. public company boards, management and public accounting firms. The bill was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron , Tyco International , Adelphia , Peregrine Systems and WorldCom . “A variety of complex factors created the conditions and culture in which a series of large corporate frauds occurred between 2000 and 2002. The spectacular, highly-publicized frauds at Enron, WorldCom , and Tyco exposed significant problems with conflicts of interest and incentive compensation practices. The analysis of their complex and contentious root causes contributed to the passage of SOX in 2002” (Farrell, 2005). These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation’s securities markets . “The Enron scandal deeply influenced the development of new regulations to improve the reliability of financial reporting, and increased public awareness about the importance of having accounting standards that show the financial reality of companies and the objectivity and independence of auditing firms” Oxley Act in 2002, as a result of the first admissions of fraudulent behavior made by Enron . The act significantly raises criminal penalties for securities fraud , for destroying,
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Sarbanes Oxley Act 3 altering or fabricating records in federal investigations or any scheme or attempt to defraud shareholders” (Cohen, Dey, & Lys, 2005, p. 5). The Sarbanes Oxley Act contains 11 different sections called “titles” ranging from additional corporate board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. The 11 titles are: Public Company Accounting Oversight Board (PCAOB); Auditor Independence; Corporate Responsibility; Enhanced Financial Disclosures; Analyst Conflicts of Interest; Commission Resources and Authority; Studies and Reports; Corporate and Criminal Fraud Accountability; White Collar Crime Penalty Enhancement; Corporate Tax Returns; and Corporate Fraud Accountability. Some of the perceived problems unearthed by the Senate Banking Committee leading to
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Sarbanes Oxley Act of 2002 - Sarbanes Oxley Act Running...

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