March 3rd 2013
There were over a dozen corporate scandals involving unethical corporation practices between the years 2000 and 2002. The cases from such, ranged from faulty revenue reporting and falsifying financial records, to even shredding and destruction of financial documents (Patsuris 2002). Most known to the public are cases involving Enron and Arther Andersen. Involving Enron went public in October of 2001. The allegations included hiding debt, and boosting profits to the tune of more than one billion dollars. Continued on are charges of bribing foreign government to win contacts and manipulation of both the California and Texas power markets (Patsuris 2002). Arthur Andersen was arrested for shredding documents related to the auditing done for Enron. Creating a widespread uproar from both external and internal parties.
As details of the Enron scandal surfaced public outrage grew, calling for action, accountability and consequences. As a result, of this rash of executive abuse, Congress passed the Sarbanes-Oxley Act in 2002. The Sarbanes-Oxley Act of 2002 was signed into law on July 30, 2002 by President Bush. Its goals are to protect investors by improving accuracy of and reliability of corporate disclosures and to restore investor confidence. The act is named after Senator Paul Sarbanes of Maryland and Representative Michael Oxley of Ohio (Wikipedia Online).
The act introduced changes to the regulation of corporate governance. Corporate governance is a multi-faceted subject that sets forth the rules and responsibilities of the relationship between the corporation and its stakeholders (Cross & Miller, 2012). The Sarbanes-Oxley Act protects corporate governance, by defining the minimum accounting standards and addressing the consequences when those standards are not met.
The intent of the act is to protect investors from inaccurate financial reporting. It sets forth strict compliance regulations and harsh penalties...