Ethics Article Review

760 words - 3 pages

In recent years, accounting scandals have caught public attention and forced companies to examine their ethical practices in this area. Since the introduction of Sarbanes-Oxley Act of 2002, (SOX) legislation turned corporate America on its ear. The article titled, "Corporate Executives and Auditors Try on SOX", Tom Diana (2005) examines the effects SOX has on both senior management and accounting examiners. There is much resentment felt by large corporations due to this new regulation from the government. However, this law resulted as a necessity from the public disgraces of companies like Enron, WorldCom, and Tyco purposely-misrepresenting company performance statements (Albrecht, Stice, Stice, &. Swain, 2005, chap 1).One must comprehend the regulations set forth by the SOX ruling to understand the implications for businesses. SOX law instituted shareholder protection in the form of a Public Company Account Oversight Board (PCAOB) to ensure that auditors at public corporations product accurate financial documents. Another condition imposed by this regulation stipulates that chief executive officers (CEO's) and chief financial officers (CFO's) must validate financial documents. Public businesses must now review and release economic reports on the usefulness of the in-house policy and procedures. SOX regulation instructs that employees whom reveal fraud within the company receive "whistleblower" protection in the form of back pay, attorney fees, and monetary reparations (Sarbanes-Oxley Act, 2006).The central issue in the article written by Diana (2005) focuses on the financial impact brought to corporations following Sarbanes-Oxley reform. To be compliant, the businesses must hire outside accounting firms for auditing purposes thus increasing costs. Further contributing to intensifying expenses large, recognized auditing organizations fees for services rose over 100%. Then there is the cost of obtaining software to aid in compliance to the law. The author also touches on the idea that the mandatory compliance certifications, along with handcuffed convicted offenders appearing in media turn some potential CEO's and CFO's away from pursuing that particular career path. Diana (2005) contends candidates understandably do not want the threat of jail time and possible sentencing liability attached to their chosen career.This article relates to the assigned reading in several ways. First, accounting practice competitors and investors need financial information to make educated decisions regarding business and investment decisions. The article mentions the fact that SOX protects shareholders against company dishonesty as well as insider trading, while the reading mentions...

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