Reforming Corporate America
Essay Preview: Reforming Corporate America
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The article in review comes from the journal Graziadio Business Review titled “Reforming Corporate America” delivered by Larry Bumgardner, JD. The article discusses “how the Sarbanes-Oxley Act may impact American business” offering some very good points (Bumgardner, 2003, p. 1). The article in review will confirm how the SOX Act will change decisions made within the business environment of today along with offering the penalties of any misconduct.
During the turn of the century the business market had gone through a number of scandals. In 2001, Enron/Anderson along with other businesses, including Global Crossing and ImClone started off the shady accounting methods of misrepresentation accounting facts with little enforcement by the federal government. Then in 2002 WorldCom along with Adelphia were part of the largest corporate fraud cases in Americas history with amounts reaching into the billions (Bumgardner, 2003).
Because of these fraudulent activities, the Senate and the House of Representatives agreed unanimously to pass the once controversial proposal followed by the signing of the SOX Act by the nations president during the summer of 2002. Backed by the SEC the SOX Act is to guarantee accountability and integrity of the business financial statements between public trade companies. The Sarbanes-Oxley Act directly oversees the obligations and responsibilities of the board of directors, corporate managers, and auditors in the reporting of a businesss financial documents. The PCAOB (Public Companies Accounting Oversight Board) was also created from the SOX Act. The PCAOB is responsible for overseeing the financial statement audits of any public trade company along with establishing the auditing standards within the United States (Bumgardner, 2003).
The purpose of the SOX Act is to increase confidentiality to the investors fiscal statements that a corporation releases. Confidence had been lost because of false reporting, resulting in millions of dollars lost by investors. The SOX Act required a complete overhaul of the current standards of financial accounting and auditing standards. Although these standards and regulations are integrated into the system, in time necessary addendums and modifications will be implemented. One thing for sure is the board of directors, external auditors, and corporate managers have a greater responsibility to ensure accurate and timely financial reports are provided for investors (Bumgardner, 2003).
With the enforcement under the SOX Act, new standards will reshape the ethical standards of corporations, or they will face much stricter criminal penalties for their actions. These penalties include fines and five years imprisonment for failure to maintain the auditing and review process, or 20 years for mail and wire fraud (Bumgardner, 2003).
The SOX Act was placed into law because of the