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Analyzing the impact of the sarbanes-oxley act
Analyzing the impact of the sarbanes-oxley act
Events that lead to the Sarbanes-Oxley Act
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The Computer Fraud and Abuse Act (CFAA) of 1986 is a foundational piece of legislation that has shaped computer crime laws for the United States. It was spawned from Comprehensive Crime Control Act of 1984, Section 1030 that established three new federal crimes to address computer crimes. According to Sam Taterka, “Congress tailored the statute to three specific government interests: national security, financial records, and government property” (Taterka, 2016). The statue was criticized for the narrow range of issues it covered and vague language.
In response, Congress expanded the statue in 1986 by passing Pub. L. No. 99-474. The expansion included thee new prohibitions “Section 1030(a)(4) prohibits unauthorized access to a computer with
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Circuit Courts are divided if “unauthorized use” and “exceed use” can be applied using CFAA. Clearly the former employee stole information but when they accessed the information they were still employed by that employer. Where they “unauthorized”? The Circuit Courts that follow a narrow definition of CFAA are concerned “that a broad interpretation of the CFAA would mean that routine violations of employer computer use policies, such as "g-chatting with friends, playing games, shopping or watching sports highlights," could be transformed into potential criminal violations. The court therefore concluded that "exceeds authorized access" in the CFAA was "limited to violations of restrictions on access to information, and not restrictions on its use" (Dial, Moye, & Townsend, 2013). Whereas, if an employee that has access to network and uploads malware, which is a technique used by hackers, the CFAA would …show more content…
The Sarbanes-Oxley Act was drafted to encourage and protect whistleblowers from retaliation after the fraud scandal that cause the collapse of Enron in 2001. In a 2010 Senate Report found that “external auditors detected only 4.1 percent of uncovered fraud schemes, “whistleblower tips detected 54.1% of uncovered fraud schemes in public companies” and were thirteen times more effective than external audits” (Turpan, 2016). Whistleblowers serve an important service to the public and are more effective than external audits. The CFAA has been used to by employers to retaliate against employees who act as informants for agencies like Internal Revenue Service or Security Exchange Commission to expose fraud. There employees, not to their financial gain, gather information as evidence of fraud by the company. With a broad interpretation of CFAA, the employee would "exceed their authority" and was "unauthorized" to access the information, therefore allowing the company to hide their illegal
The primary purpose of the “Statute of Frauds” (SOF) is to protect the interests of parties once they are involved in litigating a contract dispute (Spagnola, 2008). The relevant statutes are reliant upon state jurisdictions to determine whether the contract falls under the SOF, and whether the writing of the contract satisfies the requirements of the statute of frauds (Spagnola, 2008). However, all contracts are not covered under the SOF. In essence, for a contract to be deemed as legal by definition of the SOF, there must be verification of the following requirements for formation of the contract, which are as follows: (1) There must be least two parties to the contract, (2) There must be a mutual agreement and acceptance on the price to pay for goods and services offered, (3) The subject matter or reason for entering the contract, must be clearly understood by all parties to the contract, (4) and there must be a stipulated time for performance of duties under the contractual obligations (Spagnola, 2008). Lastly, there are five categories of contracts that are covered under the SOF, which are as follows: (1) The transfer of real property interests, (2) Contracts that are not performable within one year, (3) Contracts in consideration of marriage, (4) Surtees and guarantees (answering to the debt of another), and (5) Uniform Commercial Code (U.C.C.) provisions regarding the sale of goods or services, legally valued over five hundred dollars ($500.00) (Spagnola, 2008).
The Telecommunications Act of 1996 can be termed as a major overhaul of the communications law in the past sixty-two years. The main aim of this Act is to enable any communications firm to enter the market and compete against one another based on fair and just practices (“The Telecommunications Act 1996,” The Federal Communications Commission). This Act has the potential to radically change the lives of the people in a number of different ways. For instance it has affected the telephone services both local and long distance, cable programming and other video services, broadcast services and services provided to schools. The Federal Communications Commission has actively endorsed this Act and has worked towards the enforcement and implementation of the various clauses listed in the document. The Act was basically brought into existence in order to promote competition and reduce regulation so that lower prices and higher quality services for the Americans consumers may be secured.
Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur. To ensure proper accounting standards have been used Sarbanes Oxley also requires that public companies be audited by accounting firms (Livingstone). The problem is that the accounting firms are also public companies that also have to look after their bottom line while still remaining objective with the corporations they audit. When an accounting firm is hired the company that hired them has the power in the relationship. When the company has the power they can bully the firm into doing what they tell them to do. The accounting firm then loses its objectivity and independence making their job ineffective and not accomplishing their goal of honest accounting (Gerard). Their have been 379 convictions of fraud to date, and 3 to 6 new cases opening per month. The problem has clearly not been solved (Ulinski).
On the surface, the motives behind decisions and events leading to Enron’s downfall appear simple enough: individual and collective greed born in an atmosphere of market euphoria and corporate arrogance. Hardly anyone—the company, its employees, analysts or individual investors—wanted to believe the company was too good to be true. So, for a while, hardly anyone did. Many kept on buying the stock, the corporate mantra and the dream. In the meantime, the company made many high-risk deals, some of which were outside the company’s typical asset risk control process. Many went sour in the early months of 2001 as Enron’s stock price and debt rating imploded because of loss of investor and creditor trust. Methods the company used to disclose its complicated financial dealings were all wrong and downright deceptive. The company’s lack of accuracy in reporting its financial affairs, followed by financial restatements disclosing billions of dollars of omitted liabilities and losses, contributed to its downfall. The whole affair happened under the watchful eye of Arthur Andersen LLP, which kept a whole floor of auditors assigned at Enron year-round.
Which shows that transparency principle of GBSC failed at the corporation level. Transparency principle involves truthfulness, deception and disclosure (Paine et al 2005). Truthfulness – dishonest to suppliers/partners; Deception – false marketing and advertising to customers/ competitors; Disclosure – failed to provide unbiased information to investors and employees. Enron restricted “the flow of negative information to continue inflate the stock value and failed to maintain openness to signs of problems” ( Seeger & Ulmer 2003). Enron plotted with auditor Arthur Anderson kept debt off its balance sheet to hide the true condition of the company. Their loans were treated as “income from partnerships and not as liabilities” (Sims & Brinkmann 2003). In fact, Enron scandal seems to have been a foreseeable failure (Gordan N 2002). “Enron CEO Jeffrey K. Skilling and exEnron CFO Andrew S. Fastow created and implemented business ideas that led to major problems” (Fusaro and Miller 2002), which could not be legally or ethically secure, resulting in their collapse (Petrick & Scherer 2003). In this way, they generated wealth for investors and themselves. This creates the ethical dilemma of whether or not to disclose this
The CFAA was made to cover the majority of computer crimes. The Computer Fraud and Abuse Act was created because the United States Secret Service, and other government agencies needed a law to allow them to investigate cyber-crimes. The United States government also needed a way to discourage and stop people from hacking, accessing data, and many other internet crimes from a government computer. With computers on the rise, and the government converting to computers, the government needed a way to discourage and prosecute someone that damaged or gained access to the government’s information, and any other kind of computer. This law was also made to protect any kind of businesses computers or servers. The CFAA also is considered a net that Congress throws all the bad fish in. Including “fraud, hacking, piracy, DOS (Denial of Service) attacks, trafficking passwords, (selling, stealing, and buying passwords), and distributing malicious code.” To summarize the Computer Fraud and Abuse Act it protects “anything that connects to the internet”.
It is a PC law in the United States that on a very basic level assurances people and relationship against different people who wish to preference from an Internet space name or trademark that is extensively utilized by a business or brand. Going before the approbation of ACPA the lacking validity practice of enlisting the space name of an unmistakable business or brand and a brief while later attempting to offer it to an affiliation that for the most part participates under that name was normal. In a few delineations, the extent name was not offered available to be acquired, but rather the registrant still attempted
Enron was on the of the most successful and innovative companies throughout the 1990s. In October of 2001, Enron admitted that its income had been vastly overstated; and its equity value was actually a couple of billion dollars less than was stated on its income statement (The Fall of Enron, 2016). Enron was forced to declare bankruptcy on December 2, 2001. The primary reasons behind the scandal at Enron was the negligence of Enron’s auditing group Arthur Andersen who helped the company to continually perpetrate the fraud (The Fall of Enron, 2016). The Enron collapse had a huge effect on present accounting regulations and rules.
Swartz (2013). A case that has been reported as “he most concerted effort to revise the CFAA came after a U.S. attorney used it to launch a heavy-handed prosecution against internet activist Aaron Swartz for what many considered a minor infraction” (Zetter, 2014, para. 7). In short, Aaron Swartz “was indicted after he gained entry to a closet at MIT and allegedly connected a laptop to the university’s network to download millions of academic papers that were distributed by the JSTOR subscription service” (para. 7). Charges for Swartz’s case reached a maximum of one (1) million dollars in fines and up to thirty-five (35) years in prison (Randall, 2013, para. 2). With the flaws and punishments outline within the CFAA, Swartz was heavily charged. Unfortunately, Swartz committed suicide due to the severity of the charges for a crime that should have received a lesser sentence. Being titled as “outdated,” the CFAA underwent another change and created Arron’s Law. Simply put, “Aaron’s Law removes the phrase ‘exceeds authorized access’ and replaces it with ‘access without authorization,’ which it defines as, ‘to obtain information on a computer that the accesser lacks authorization to obtain” (Randall, 2013, para. 5). Furthermore, Arron’s Law would exclude breaches of terms of service and user “agreements from the law and also narrow the definition of unauthorized access to make a clear distinction between criminal hacking activity and simple acts that exceed authorized access on a minor level” (Zetter, 2014, para. 8). As it is stated, Aaron’s Law sets to clarify statues within the CFAA and protect those from being heavily charged for minor
There are different types of computer crimes that many people become victims of every day. Computer crime is any crime that involves a computer and a network. The computer may have been used in the commission of a crime, or it may be the target ("Computer Crime: Chapter 2: What Are the Crimes? ", n.d.) - " Crimes such as data diddling, pump and dump, social engineering and spoofing are computer crimes. Even though these crimes are difficult due to privacy issues, the new technology has made investigations and prosecutions well organized and effective.
Computer Misuse Act 1990 (1)In late 1984 and early 1985 Robert Schifreen and Stephen Gold, gained unauthorized access to British Telecom's Prestel interactive viewdata service (2)using home computers and modems. (3)BT had not taken security seriously and (4)the pair explored the system more. Later on, they even (5)gained access to the personal message box of Prince Philip. (6)In 1990 an act introduced partly in response to the decision in R v Gold & Schifreen ( 1988 ) 1 AC 1063 by (7)the Parliament of the United Kingdom. (8)The Computer Misuse Act 1990.
Major Amendments to the CFAA 1994 The 1994 amendments removed the requirement that the offender access the computer “without authorization”. This introduced a whole new class of offenders: individuals who are authorized to use a third-party computer, and use that access to break the
• Laying a trap to obtain password. 2. Unauthorised access to a computer system with intent to commit or facilitate the commission of a further offence, for example: • Creating a backdoor or Trojan or allowing a covert user administrator privileges. 3. Unauthorised modification of computer material such as: • The distribution of viruses, as well as the amendment of data to gain personal advantage such as bank account details • This act is one of the most important act when it comes to dealing with criminal offence in relation to a computer system.
Through an organizational culture that focused on financial greed for self, illegal accounting practices, conflicts of interest partnerships, illegal business dealings, fraud, negligence, and massive corruption at all levels, the Enron scandal help to create new laws and regulations with stiff penalties if violated (Ferrell, et al, 2013). The federal government implemented the Sarbanes Oxley Act (SOX) (Ferrell, et al, 2013).
New laws that involve the internet have been passed but are now getting a second look, as they too may be against the Constitution. The Children's Internet Protection Act that requires libraries to use anti-pornography software has been brought back into the Supreme Court with the help of the ACLU because it...