Enron – Sox Act
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Ethical decisions are important to all business and particularly when severe ramifications occure due to internal decisions and policies. Sarbanes-Oxley Act (2002) allow business to make sound decisions. Therefore, in some cases business success and failure are the results of the conditions of the market in which they operate. Enrons the time, but in the case of Enron which was a rising company in the 90s, founded in 195 as a traditional energy company selling natural gas to distributors and business.
Enrons used (SPE) Specila Purpose Enntitesm thus accounting tool has been used by business since 1970s until the Enron Scandal. However, the activity that placed Enron in its derailed and criminal penalties was their decifitful activitity in their balance sheets. Enrons executives had in fact fraudulently reported profits but not its debts, inflating its stock value and enabling it to obtain some capital from ignorant financial institutions. Their downfall was inlating the companys profit and hiddent its debts.
Further, enrons accountant admitted in turning a blind eye to the Enrons scheme during that period and destroyed documents that would likely have proven damning to Enrons case. Setting the state for Sabarnes-Oxley and title IV strickly prohibitated any personal loans by the corporations to their executives and applied new rules to executives to curb fraudulent behavior. In addition SOX impacted all decisions making process of auditors and accounting professionals. Even international implications applied to publicaly trade business that had direct trading business with U.S. market.
Sox was created as a safeguard U.S. financial market against illicit activity such as that which Enron and others committed. SOX was created to strengthen the work of American accounting practices. This law remains both significant and revalent. Therefore, Sarbanes-Oxley Act 2002 policies outlines section 302, which mandates senior management to certify the accuracy of the reported financial statements. Section 304 manddates management and auditors to establish internal controls and reporting methods on the adequacy. As we analized throught this document The Sarbanes-Oxley created standards for corporate accountability as well as new penalties for act of wrongdoing.