Sox Paper

940 words - 4 pages

In recent years, accounting scandals have captured 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. In the article titled, Corporate Executives and Auditors Try on SOX, author Tom Diana examines the effects SOX has on both senior management and accounting examiners. There is much resentment felt amongst the corporate world due to the financial and personnel burden SOX places on companies; however, this law resulted as a necessity from the publicized corporate accounting scandals such as Enron, WorldCom, and Adelphia Communications, and HealthSouth. This paper will examine the impact of SOX and ethics on the accounting practices for U.S. businesses.SOX was signed in July 2002, by President George W. Bush. The authors of the law are Paul Sarbanes and Michael Oxley. Sarbanes is the longest serving U. S. Senator in Maryland history, having won his fifth term in 2000. He received his undergraduate degree from Princeton University, and a Harvard law degree. Sarbanes is the senior Democrat on the Senate Banking, Housing, and Urban Affairs Committee. Representative Michael Oxley was elected to the Ohio House in 1972 at the age of 28. Oxley has his undergraduate degree from University of Miami in Oxford, Ohio, and received a law degree from the University of Ohio. He is now the chairman of the House Committee of Financial Affairs. The largest part of the Sarbanes Oxley Act is not all the sections that it covers in the law, not who signed it, or even authored it; it is how corporations will comply to this extensive piece of legislation.One must comprehend the regulations set forth by the SOX ruling to understand the implications for 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 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.The central issue in the article written by Diana 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%. In addition, 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...

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