Essay About Sarbanes-Oxley Act And Direct Consequences Of Big Scandals

Organisation Management
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IntroductionOn July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, which everyone agrees is the most significant legislation affecting the accounting profession since 1933.How did we came to that point? The House had passed the Oxley bill in April 2002, which was related to the accountability, and transparency of stating financial status of the company. At the same time Senator Paul Sarbanes had another proposal on the similar lines. He presented the bill to the Senate Banking Committee which passed the bill with a majority. Then, both the proposals made by House Representative Oxley and Senator Paul Sarbanes were reconciled to be formed in to one act, which is now popularly known as the Sarbanes Oxley. This is roughly what has been the direct consequences of big scandals that had shaken The US, like Enron, World comIndeed, When the Enron/Andersen scandal first unraveled in late 2001, followed quickly by ImClone, Global Crossing,Ð Congress did very little. Several committees did hold hearings, and a number of bills were introduced to address corporate misconduct. Then came a second wave of scandals, led by WorldCom and Adelphia in the summer of 2002. As the stock market continued to plummet only a few months before the fall elections, Congress and the White House saw the need for action. This time, Congress rushed to pass the complicated Sarbanes-Oxley Act before the August recess. The previously controversial proposal had suddenly become very popular, passing 99-0 in the Senate and 423-3 in the House. The Sarbanes-Oxley Act (known as SARBOX or SOX) sought to address these concerns through making executives responsible for company accounting statements, redefining the relationships between corporations and their auditors, and restructuring the internal audit systems of public corporations. Since the implementation of the law, SOX has redefined the corporate accounting worldIt has now become mandatory for companies to have Sarbanes Oxley compliance. Section 404 stated in the Sarbanes Oxley act is the ones that has caused the most concern in the financial sector according to which requires the corporate body to enhance stricter controls over the financial reporting .The purpose of this essay will be toÐ analyse advantages and disadvantages of Sarbox, then explain