Results of SOX Compliance Surveys
The SOX referring to the Sarbanes-Oxley Act of 2002, was enacted as a federal law in 2002 by Congress to curb massive accounting and corporate frauds that were happening in public companies before the act. Investors from companies that went public received heavy losses resulting from financial statements that were highly inaccurate and deceptive and some of these corporations included WorldCom, Adelphia, Tyco, and Enron (Grant and Vanac, 2005). As a result of shareholders’ losing billions of dollars from such deceptions, the confidence level of investors in the United States financial markets drastically declined. From this, the legislature decided to institutionalize controls in accounting, management, and
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Going public at this juncture would be detrimental to the company’s financial position as the company would incur large financial burdens required to fund the administrative costs increments after going public. SOX, on one hand, can make listed companies acquire credibility and accountability as it becomes transparent to its shareholders and prevents material misstatements and accounting fraud. Through money raised from investors in order for them to have an equity stake in the company, the investment is used in shareholder value increment through strategic and operational efforts. However, SOX compliance may prevent company managers and employees from concentrating on revenue or business-driven activities, thus the company focuses on short-term goals rather than long-term goals. As mentioned above the large financial cost burdens and compliance regulations can be limiting to smaller and medium-sized companies that lack the resources to fund and execute such compliance measures. For example, Congressman Ron Paul argued that corporations were driven away from the United States simply because the SOX Act provided bureaucratic requirements of compliance making U.S. companies be at a disadvantage competitively. This was evidenced by the delisting of foreign corporations from the stock exchange in the United States (Bergen, 2005; Grant and Vanac,
Internal controls are in place to protect entities against theft from dishonest workers and outside predators. They are also an accurate series of checks and balances and are in place to find discrepancies.
Dodd-Frank and Sarbanes-Oxley Acts are important legislations in the corporate world because of their link to public and privately held companies. Sarbanes-Oxley Act was enacted to enhance transparency and accountability in publicly traded companies. On the contrary, Dodd-Frank Act was enacted to disentangle the confused web of financial service company valuations. Actually, these valuations are usually hidden by complex and unclear financial instruments. The introduction of Sarbanes-Oxley Act was fueled by recent incidents of accounting frauds by top executives of major corporations such as Enron. In contrast, Dodd-Frank Act was enacted as a response to the tendency by banks, insurance companies, hedge funds, rating agencies, and accounting companies to serve up harmful offer of ruined assets and liabilities brought by systemic non-disclosure (Anand, 2011, p.1). While these regulations have some similarities and differences, they have a strong relationship with the financial markets.
It has been a decade since the Sarbanes-Oxley Act became in effect. Obviously, the SOX Act which aimed at increasing the confidence in the US capital market really has had a profound influence on public companies and public accounting firms. However, after Enron scandal which triggered the issue of SOX Act, public company lawsuits due to fraud still emerged one after another. As such, the efficacy of the 11-year-old Act has continually been questioned by professionals and public. In addition, the controversy about the cost and benefit of Sarbanes-Oxley Act has never stopped.
The rise of Enron took ten years, and the fall only took twenty days. Enron’s fall cost its investors $35,948,344,993.501, and forced the government to intervene by passing the Sarbanes-Oxley Act (SOX) 2 in 2002. SOX was put in place as a safeguard against fraud by making executives personally responsible for any fraudulent activity, as well as making audits and financial checks more frequent and rigorous. As a result, SOX allows investors to feel more at ease, knowing that it is highly unlikely something like the Enron scandal will occur again. SOX is a protective act that is greatly beneficial to corporate America and to its investors.
Public companies are any company that has stock available to the public to buy. A company that wishes to set up a new business or expand its existing business can raise the capital it requires either by borrowing money or by issuing shares to investors. The investors become shareholders in the company, meaning they are part owners of the company and share in its profits and growth. These stocks represent how well the company is doing. When the accounting books are tampered with to show the company is thriving when debt is actually accumulating is when investors lose all their shares because they fall all of a sudden and lose all worth; without any warning. Companies wishing to have their shares traded must first be listed. To become listed, a company must be large enough for there to be a market in its shares and it must agree to abide by the listing rules which, with other things, require it to keep the market informed of its activities and to regularly report profits and other financial information (Flint). Auditing firms have been overlooking figures and hiding debt from the public for their high paying companies. This is where our corporations have gone astray and started to cheat their investors by deception because of conflicts of interest of...
This paper will show how the facility will continue to stay abreast of the Occupational Safety & Health Administration (OSHA) standards. The paper will also take a look at the activities and the frequency of training and audits that the hospital will conduct throughout the year. This paper will address the possibility of the fines the hospital has received and what causes the fines. The OSHA is an organization that provides a safe work environment for all staff members.
In recent years the issue of corporate governance has become a keenly debated topic in international finance. In developed countries, some of the biggest corporate collapses in history have brought about a change in focus. No longer are governments and lawmakers trying to deregulate and reduce the controls and disclosure requirements of corporations. The deregulation boom has ended, as regulation comes back into the picture.
This report gives the brief overview of the concept of corporate governance, its evolution and its significance in the corporate sector. The report highlights various key issues and concerns that are faced by the organizations while effectively implementing and promoting Corporate Governance.
The end of 2001 and the start of 2002 saw the end of a period of magnified share prices and booming businesses. All speculations of misrepresentation came to light and those firms which once seem unconquerable were now filing for bankruptcy. Within this essay, I shall discuss the corporate governance mechanisms and failures which led to the Enron scandal resulting in global corporate governance reforms being encouraged.
Introduction Bigger Large state controlled corporations have usually faced with dilemma about sufficiently
In October 2012, FAF proposed the structure for PCC, which would reduce the responsibility of FASB over privately held companies in the United States. There are nine to twelve PCC members selected by FAF. The current PCC Chair, Mr. Candace Wright, is expected to work with FASB to ensure PCC operates to fasten the procedure of setting financial reporting provisions for private companies. Corresponding to FASB, “The PCC will review and propose alternatives within GAAP to address the needs of users of private company financial statements” (FASB, 2013). With that being said, the PCC is created to make changes to GAAP in order to better fit the users of financial statements of private companies.
The SOX is to restore confidence and reassurance to the American people and notice to corporate America, unethical business practices will not be tolerated (Ferrell, et al, 2013). All key players in an organization such as the top executives, lawyers, accountants, banks, board of directors, and employees all have an obligation to do the right thing and report any wrong-doings (Ferrell, et al,
Empirical evidences show that good corporate governance promotes effective monitoring of corporate assets; effective risk management and greater transparency. It also helps to achieve and maintain public trust and confidence in how companies are run. I.e. it is a means to keeping companies profitable. A study by Epstein et al., (2012) highlighted that from either an internal long-term profitability or external shareholder perspective, there is an indication that good board governance add value to an organisation. In contrast, poor corporate governance may contribute to company /business failure, which could, in turn, causes a company into liquidity crisis leading them to insolvency or total collapse.
The first one of the organizations that is responsible for assisting and overseeing companies is the Security and Exchange Commission (SEC). “The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation” (SEC 2008, ¶ 1). Basically it is the SEC’s job to interpret the laws that congress passes and assist companies in implementing these laws. While Congress makes modifications to laws it is this companies job to also make all companies aware of these changes and help them to make a smooth transition into using the newly amended law.
There has been a drive towards corporate governance which has been driven by a greater need for shareholder protection. If investors feel well cushioned then there is a higher chance that t...