This website uses cookies to ensure you have the best experience. Learn more

Regulation Of Financial Misconduct Essay

1400 words - 6 pages

The prospects offered by globalization and the accrued benefits from technological innovation have greatly influenced the growth of the business realm in the 21st century world. Despite the increment in success rate of businesses and expansion to global markets, financial misconduct within organizations has threatened to derail the financial success and better public investment decisions (Onyebuchi, 2011). Sprouting from this likelihood of financial misconduct and its detrimental effect, Sarbanes-Oxley Act was enacted in 2002. The genesis of this law can be traced back to a period between years 2000 and 2002 when United States was marred with a perverted upsurge in corporate accounting scandals that tainted the United States securities market and led to loss of public funds invested in listed companies. Scandals of organizations like Adelphia, Peregrine Systems, Tyco International, and Enron among others were great primers to the need for a law regulating the financial accounting profession (Orin, 2008). This paper uses Sarbanes-Oxley Act (SOX) to delineate the main aspects of the regulatory environment for corporations aimed at protecting the public from fraud. Moreover, it will evaluate the effectiveness of SOX in taming future frauds.
Financial fraud in the context of SOX is used to denote financial reporting that omits crucial information or misreports the financial stand of an organization to deliberately portray a positive outlook of the organization (Schlesinger, 2002; SOX 2004). For example, accountants might decide to classify financial information as nonfinancial with the intent of masking an accrued loss. Whether financial misreporting is done deliberately or erroneously, it constitutes financial fraud and this is the reason keen examination of financial reports is
advised before publishing them. The inflated financial reports that arise from fraudulent accounting are great primers to an abrupt shift in securities exchange markets. This shift results from investors move to prefer stocks of organizations depicted as financially strong (Onyebuchi, 2011). However, such a move arising from misreported performance would risk drowning investors’ cash on securities that will never yield profit. This resulting loss of public cash has greatly made SOX a highly needed legislation for its provisions on control of financial fraud (Orin, 2008). The crucial accounting malpractices that constitute high-level financial fraud include but not limited to taking off-balance sheet crucial items as well as depicting as non-financial information that would have otherwise been considered financial.
After enactment of SOX, it has become mandatory for corporate organizations’ top management to ascertain and certify the accuracy of financial reports individually before they endorse them (Orin, 2008; Kessel, 2011). As such, although junior financial officers through the chief financial officers prepared the statements, individual...

Find Another Essay On Regulation of Financial Misconduct

Law and Regulation, The Apitome of American Capitalism? The Emergance of Wall Street and New York as an International Financial Icon 1900-2002. Steele's novel "The Great Game"

1764 words - 7 pages Today, Governmental law and regulation seems to be the epitome of American capitalism. But this was not always the case; in the beginning, Wall Street was a ruthless environment with almost no laws or regulatory measures. Fraud, bribes, insider trading, market corners and an overall lack of precise accounting created a tremendously unbalanced market in which small shareholders were the primary losers. Men such as Cornelius Vanderbilt, Jay Gould

Discuss how financial markets in Australia are regulated by the Reserve bank of Australia, the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission

1309 words - 5 pages market by conducting monetary policy on behalf of the government; systemic stability; control of note issue; regulation of the payments system; banker to the banks; responsibility for holding Australia's reserves of gold and foreign currency dealings; banker and source of financial and economic advice to governments. In recent years, its major aim has been to sustain low inflation.The RBA influences inflation by undertaking DMOs, or Domestic Market

Australian Economics

2105 words - 8 pages financial stability, better economic performance, integrity, fairness and prudence in the country’s financial system (Commonwealth of Australia, 2009). Prior to this, the financial system had been de-regulated in the 1980s, around the same time that the Australian Dollar was floated (Cameron, 1998). Upon the completion of the inquiry, the FSI proposed a regulation system based on three agencies namely: i) the central bank; ii) a prudential regulator

Financial Crisis of 2008

2303 words - 9 pages , William. 'Ending Too Big To Fail - Federal Reserve Bank Of New York'.. N. p., 2014. Web. 29 Apr. 2014. Institute, Asian. 'Regulation Of Credit Rating Agencies: Why And How?'. N. p., 2014. Web. 29 Apr. 2014. Jansch, Ivo. 'Bail-In – The Key To Ending "Too Big To Fail" - Global Trends - Credit Suisse'. N. p., 2014. Web. 29 Apr. 2014. Jost, Kenneth. 'Financial Crisis'. N. p., 2014. Web. 29 Apr. 2014. Jost, Kenneth. 'Financial Misconduct'. N. p

Wise Decision: Sherron Watkins Letter to Kenneth Lay

946 words - 4 pages . Was Sherron Watkins a whistle-blower or not? Explain your position. A whistle-blower is a person who exposes misconduct, alleged dishonest or illegal activity occurring in an organization. The alleged misconduct may be classified in many ways. For example, a violation of a law, rule, regulation and/or a direct threat to public interest, such as fraud, health and safety violations, and corruption. Whistleblowers may make their allegations

UK Financial Regulatory Framework

2537 words - 10 pages Introduction The financial regulatory framework in UK is called GAAP or General Accounting Accepted Practice and is the body responsible for the rules and regulation that companies within the UK must follow when reporting financial information. There are three main sources of rules governing accounting regulation in UK namely: the companies’ act 2006, (which incorporated EU accounting directives), UK accounting standards (FRSs and SSAPs) and

Police Misconduct

8144 words - 33 pages of power. These methods are promulgated by legislation, by regulation, or by court decision (Swanson, Territo, & Taylor, 2001). After studying the methods used to limit police misconduct, they will be evaluated in an attempt to show how they may be applied to the Turkish National Police. 7 Methodology This thesis aims to unearth the best deterrents of police misconduct. To this end, police misconduct will be defined. Secondly, the nature of

SOX Paper

940 words - 4 pages U.S. businesses. SOX law instituted shareholder protection in the form of a Public Company Account Oversight Board (PCAOB) to ensure that auditors at public corporations produce 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

Prosecutorial misconduct

2448 words - 10 pages nine layers and three lay people. Every lawyer that practices in Alaska is bound by these rules of conduct (Alaska Bar Association) On the local front there have been cases alleging prosecutorial misconduct ranging from conflicts of interest, and withholding evidence, Wevley William SHEA v. Alaska; extensive pre-trail discovery, Marshall, v Alaska; to sharing financial information, Cook v. Alaska. Instances how that misconduct does not need to

Organizational Financial Analysis Examine programs that provide solutions to today’s health care problems Evaluate the impact of the choice on global health care options and the impact of fraud on the...

2419 words - 10 pages Organizational Financial Analysis PAGE \* MERGEFORMAT 1 Organizational Financial AnalysisUniversity of PhoenixOrganizational Financial AnalysisIntroductionFinancial analysis is a necessary means of interpreting data to determine if an organization is profitable or not. Today, most managers are required to be responsible for the finances and accounting for their entire department with an expectation to analyze and understand these reports. This

The Sarbanes Oxley Act of 2002

1464 words - 6 pages , I will address the creation of a Commission designed to oversee audits and corporate accounting practices, and the potential efficacy of this Commission. Finally, I will address the modifications to the Federal Sentencing Guidelines as it relates to corporate fraud. The failure to directly address accounting practices as they relate to stock options and other corporate incentives in Sarbanes-Oxley indicates the flaw in Federal regulation of

Similar Essays

Failure Of Three Regulation In Financial Crisis

1838 words - 7 pages causes of the financial issue can assist each country to clarify problems. The purpose of this essay is to elucidate regulatory failure in 3 major types: first, misguided intervention in the U.S. second, failure of financial risk management, next, the lack of transparency regulation in private and public sector, and a case study from Lehman Brothers. Firstly, an erroneous policy from the U.S government caused a long term effect to a financial

Regulation Of Banking And Financial Services

1525 words - 6 pages Regulation of Banking and Financial Services The Failure Process Imposed Upon Financial Institutions The concept of systemic risk sprung to the foreground of the public’s consciousness during the financial crisis of 2007-8 as the Too Big To Fail (TBTF) banks were bailed out by the various US Federal Government agencies e.g., US Treasury via the Troubled Asset Relief Program (TARP) and the US Federal Reserve via Quantitative Easing (QE). However

The Global Financial Crisis And The Regulation Of Investment Banks

1271 words - 6 pages Lessons of GFC for the regulation of Investment Bank Investment Banks enable individuals, institutions such companies, governments to raise capital by offering underwriting services or working as an agents of the client in offering securities or in both roles. Investments banks play a very important role in stimulating investments in the United States both from individuals and corporate. The global financial environment has over the last

Describe The General Development Of Financial Accounting Regulation In The United Kingdom From 1970 To The Present Day

1039 words - 4 pages The role of financial accounting in today's business environment is undeniably important. The information provided by accountants can have major influences over a number of different people and parties, from a firm's management team, to an external investor. Here in the UK, we have a large and complex stock market system as well as broad based community of investors. As such, it is vital that the profession be properly regulated and