The Sarbanes Oxley Act of 2002 Essay Example for Free

The Sarbanes Oxley Act of 2002 Essay The law officially named, â€Å"The Public Company Accounting Reform and Investor Protection Act†, was passed into law in 2002 in wake of the numerous corporate scandals that rocked our financial markets. One in particular was the Enron scandal, which before its collapse; Enron was thought of as one of the best companies in the United States. However, it failed to follow Generally Accepted Accounting Practices (GAAP) from as far back as 1997 through 2001. When the company suddenly collapsed in the latter part of 2001, it lost tens of billions of dollars of its shareholders money (Jickling 2003). The controls which were supposedly in place, neither internal nor external, did not uncover the financial masquerade. Because of the many corporate and accounting scandals to astonish the U. S. marketplace and its investor, shareholders organized and protested for tougher laws that required a greater degree of corporate accountability. The act is commonly referred to as the Sarbanes-Oxley Act (SOX), named after Senator Paul Sarbanes and Representative Michael Oxley, who were its main sponsors. SOX is intended to raise the bar for integrity and competence for publicly traded companies and also to promote a greater degree of accountability within these companies. The act changed corporate governance, including the responsibilities of directors and officers, the regulation of accounting firms that audit public companies, corporate reporting and enforcement. It is organized into eleven categories, called â€Å"titles†. The first being the Public Company Accounting Oversight Board (PACOB), second, Auditors Independence, then, Corporate Responsibility, Enhanced Financial Disclosures, Analyst Conflicts of Interest, Commission Resources and Accountability, Supporting Studies and Reports, Corporate and Criminal Fraud Accountability Document preservation (Whistle-Blower Protection), White-Collar crime penalty, Corporate Tax Returns and Corporate Fraud Accountability. Title I of the Act establishes the Public Company Accounting Oversight Board (PCAOB). It is an independent, non-governmental board that oversees the audits of publicly traded companies. The purpose was designed to protect the interest of the investors and to promote public confidence and transparency in the independent audit process. The powers of the PCAOB are to register public accounting firms that prepare audit reports for issuers; establish auditing, quality control, ethics, independence and other standards relating to the preparation of audit reports; and conduct inspections, investigations and disciplinary proceedings of, and take enforcement action against, public accounting firms (Clearly 2003). Titles II of the act have nine sections. It sets the standard in which the auditors must remain independent to limit their conflicts of interest. Under these sections the auditors have stricter requirements of reporting, they must rotate jobs and they are not allowed to perform other services to the same company they are auditing. Also, as stated in Title I the auditing company must be registered with the PCAOB to perform acceptable audits. Title III of this act speaks to the individual responsibility of the corporate leaders. Management must certify that the financial statements do not contain any material omissions or untrue statements and those they represent fairly the financial condition of the company. And that all of the internal controls are and have been operating effectively prior to the issuance of the reports. Title IV relates most closely with the accountants and the auditing process. It details the new requirements of the financial reporting process and the certification of the effectiveness of the companys internal control process. Section 404 which requires management to assess the internal control procedures and to sign off on its effectiveness and that the procedures are being followed. Section 404 highlights the critical importance of controls related to the financial reporting function of management information systems by requiring a regular assessment of the quality of the financial reporting, because management uses this to manage operations, monitor performance, create forecast and report results to stakeholders (Peters 2012). Title V, VI and VII are designed to help build the publics confidence in the markets by promoting transparency and by providing criminal sanctions and monetary penalties to perpetrators. Title VII can be considered a reflection piece, as it looks to examine different factors and how they affect the markets. The SOX act in Title VIII obligates companies to provide a documented whistle-blower protection policy. It is a means to collect, retain and resolve claims regarding accounting, internal accounting controls and auditing matters. This system must allow for such concerns to be submitted anonymously. SOX provides protection to whistle-blowers and severe penalties to those who retaliate against them. Under this provision violators who destroy, alter, or falsify documents or retaliate against employees who report such going-on are subject to lengthy prison terms. Title IX, X and XI outline the increase penalties for white-collar crimes, such as mail and wire fraud; the requirement that the CEO is responsible for the accuracy and certifying the corporations tax return and other financial reports. The last section institutes guidelines for failure to comply as a criminal offense and gives the SEC the right to freeze monetary transactions if they suspect fraud. Before SOX, the financial world was basically governed by the Securities Laws of 1933 and the establishment of the Securities Exchange Commission (SEC) in 1934. Corporations were only required to report the financial reports periodically to the public and the SEC. It was the publics responsibility to review the records and form an educated decision on the well-being of the company. The act also prohibited certain conduct such as insider trading and market manipulation. The exchanges, brokers, transfer agents were responsible for reporting any material changes in the holding of the companies to the SEC. However after the numerous financial scandals such as Enron, WorldCom, Adelphia to mention a few, in which the information presented to public, was fraudulent. They statements were misrepresented by millions and millions of dollars it was felt by the general public, investors and the federal government that there had to be stricter regulations to govern against such corporate behavior. SOX calls for greater accountability from everyone in charge. It implements rules and requirements from the top-down on accountability. CEO, CFO, directors must sign off on the reliability of the reports; auditors must maintain their independence and are prohibited from performing other services to the company they are auditing; managers and employees are responsible for the internal controls in their departments. And all these actions are punishable if not followed, as addressed in Title XI. Title XI provides authoritative powers for companies, its leaders, employees and/or auditors to be sued, sanctioned or criminally prosecuted if they are involved in any fraudulent behavior. It also provides the SEC the ability to seize funds and/or impose significant financial penalties for breaking the law. The most significant impact that SOX has had on the accounting world besides the increased criminal prosecution, is Section 404, which outlines the managements assessment of internal controls over financial reporting and the disclosure of such information. Internal control over financial reporting, is defined by Guy Lander, as a process designed by, or under the supervision of, the companys principal executive and principal financial officers and implemented by the companys board of directors, management, and other personnel to provide reasonable assurance for the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The independent auditor must also attest to and report on the managements assessment of the effectiveness of the companys internal control over financial reporting. Each fiscal year, companies must select audit committees to perform the assessment of internal controls. In section 404, the auditing requirements have changed drastically. Integrated within the law is now a Code of Ethics which was not there prior to the SOX act. Everyone is now accountable and required by law to do the right thing. With the implementation of SOX, the spirit of the law is being enforced. God calls us to a higher standard. We are to perform our job to best of our ability and we should maintain our integrity. No law is higher than the laws given to us by God. Management is now required to know more about the system of internal control so that he/she can make an accurate account of its effectiveness. Management must also include a written document in their end of the year managers report to attest to the effectiveness of their internal control. CEO and CFO are required to certify that the financial reports are accurate and they must discuss with the audit committee any significant deficiencies or material weaknesses in the design or operation of internal control in the financial reporting process. The audit committee is required to attest to the integrity of the companys financial statements; the companys compliance with legal and regulatory requirements; the qualifications and independence of the independent auditor and the performance of the companys internal audit function and independent auditor (Cleary 2003). The independent auditor has an increased responsibility to verify the financial information of the company. The audit firm must attest to the reliability of managements statement on the effectiveness of their internal control procedures and processes. The SOX act requires increased communication between the auditor and the companys audit committee. They must communication at least quarterly to discuss management, accounting and/or auditing adjustments, any difficulties or disagreements encountered, or any auditors concerns over the quality of the companys accounting practices or principles (Cleary 2003). The cost of implementing the required changes associated with SOX, Section 404, Internal Controls has had a significant effect on most small business. Auditing firms increased their fees by an average of 40% to recoup fees associated with the loss of business because of the new guidelines requiring independence. The SOX guidelines limit services allowed by auditing firms to perform for companies they are auditing. Internal costs associated with compliance jumped 62% for companies. In 2007, the SEC formed a committee to determine the impact on smaller businesses. Their guidelines were business with revenue under $100 million. The impact of compliance with section 404 internal controls were 3. 5 cents for every dollar earned (Michelson 2008). According to a SOX research study by Lord ;amp; Benoit, the average costs of complying with section 404(a) management assessment for all non-accelerated filers included in the study were $53,724(ranging from as low as $15,000 to as high as $162,000. The range of audit fee increases was from as low as $7,500 to as high as $86,000). Krishnan 2008). Armed with this information the SEC decided to admen its reporting and disclosure requirements for small businesses. In February 2008, the SEC adopted the amendments and issued the Smaller Reporting Company Regulatory Relief and Simplification to provide assistance for smaller firms (Michelson 2008). Smaller companies have received multiple extensions to become fully compliant. It was stated that more than half of all small companies say SOX has made it more diff icult to do business. They have had to make cutbacks in other areas, such as marketing, research and personnel to offset the increase in costs. Also, two-thirds of the small businesses favor a different set of guidelines for smaller companies (Swartz, 2006). Another significant impact on small businesses is the increased turnover of its board members. The new guidelines that require increased independence and conflicts of interest make it more difficult for smaller companies who have higher managerial ownership. Executive directors of companies are less likely to appointed to boards. KPMGs Audit committee took a survey and found that directors were concerned with two very important issues, the first being accountability reform and their legal exposure and the second being how management is responding to Section 404 of SOX(KPMG 2004). The Sarbanes-Oxley Act is hailed as the most dramatic change and far-reaching act in the financial market place since the SEC was formed. The SOX act is here to stay and it is long overdue. There have been lists of companies and their improprieties for decades and decades that cheated others out if their fair shares. People who in charge of a companys finances and they succumbed to the temptations of greed. As humans we are fallen creatures, we need stipulations in place to keep us in check. We need laws to govern our actions. The SOX act represents a change in corporate accountability and corporate governing. Although it is still changing and adapting to the environment it has had a significant impact on the way people act. It takes into account the Spirit of the Law and not just the letter of the Law. Corporate leaders are being held to a higher standard, which is a step in the right direction. References Bedard, J. G. (2011). Detection and SEverity Classifications of Sarbanes-Oxley Section 404 Internal Control Deficienies. The Accounting Review , 825-855. Green, E. S. (2003). The Sarbanes-Oxley Act. New York: Aspen Publishers. Jickling, M. (2003). The Enron Collapse. CRS Report for Congress . Krishnan, J. R. (2008). Cost to comply with SOX Section 404. Auditing: Journal of Practice and Theory , 169-186. KPMG Audit Committee Institute (2004), Oversight of Auditors, Audit Committee Roundtable Highlights, Spring, KPMG Audit Committee Institute, Kansas City, p. 2. Lander, G. (2004). What is Sarbanes-Oxley? New York: McGraw-Hill. Michelson, S. S. (2009). The Sarbanes-Oxley Act of 2002: What impact has it on small business firms. Managerial Auditing Journal , 743-766. Peters, G. F. (2012). The Consequences of Information Technology Control Weaknesses on Management Information Systems. MIS Quarterly , 179-203. Spending on SOX. (2008). Journal of Accountancy , 90-93. Swartz, N. (2 008). SOX costs socks small firms. Information Management Journal , 14.

Use of Coincidence in Vonneguts Cats Cradle :: Vonnegut Cats Cradle

Use of Coincidence in Vonnegut's Cat's Cradle Most modern novelists avoid the use of coincidence as a plot device, and such use of coincidence is looked on as trite and cheap. This was not always the case, as novelists of yore, Charles Dickens is a great example, have been known to throw in a suspicious coincidence at the very climax of the book that ties up the plot nicely but leaves modern readers feeling betrayed and deceived. Perhaps due to more literate, sophisticated readers, or just the maturation of the novel form, writers no longer have the luxury of plot coincidence. Modern novelists have to navigate through their plot with well-crafted character motivations, understated if any foreshadowing, and logical rising action. In other words, the reader has to feel that they could have known what was coming next, even if they really had no clue. So why is Vonnegut exempt? In Cat's Cradle, most of the plot revolves around the character's coincidental meetings and odd bits of shared history. Can such a plot be credible? And why, as readers, do we let Vonnegut get away with this circus of manipulation? The most obvious reason that we let Vonnegut get away with it is because we are busy laughing. This is no coincidence. Vonnegut makes each coincidence so absurd that it's humorous. Instead of hiding the fact that a certain scene comes about as coincidence, he focuses on the coincidence, repeats it, creates another scene with it, whips us back around again, until the reader no longer thinks, "How convenient of all his characters to end up on the same plane." The reader instead starts guessing ahead, examining the details that might lead to more absurdity. Vonnegut also introduces a medium for coincidence early. If Vonnegut waits until the plot thickens, heavy in coincidence, to tell us about "Bokononism" and the inexplicable nature of a "karass", he would quickly lose credibility.

I run, every now and then when things in life get tough

It was a cool November night and there I was running through the smoky populous city of Chelmsford, rows upon rows of cars sped along the narrow concrete roads. Noise from the movement of cars and the odd occasional sound of a horn were to be heard. Among all this chaos and confusion there I was running, running as far away from my troubles as possible. My heart was pounding vigorously against my chest demanding more and more oxygen. Pain was accumulating in the lower part of my legs causing much agony. The only way that I could stop the pain was to stop running but I kept on running. I run, every now and then when things in life get tough. Every stride I take releases more stress and anger in my body. I was now panting, sweat gathered round my chest making my white cotton tee-shirt wet. I could now feel the force of the cool November air as I was making my way down hill. Maybe I shouldn't have lost my temper with my mum. I could remember the scene at home just fifteen minutes ago which made me very angry. † You've got three English essays to do and you are sitting here watching television!† I recall my mum saying. She just came home from a twelve hour shift from the hospital; physically and emotionally she was very exhausted – it's a stressful job being a doctor. Then she found me in the living room watching television – usually she doesn't say anything about that, but when I have three pieces of coursework due, she gets angry. † You have got to take some responsibility of your own,† I recall her uttering. I can still remember her brown weary eyes looking at me and the expression on her face represented someone who was tired and disappointed. Disappointed to find her only child watching television at a time when he really should be catching up with work – to be honest I don't blame her for getting angry. â€Å"Just trust me,† I remember my self pleading, † You know I will do it.† † When will u do it!†, I think my mum said, † I know when you'll do it, you'll do it at the very last minute, you'll stay up till about two o clock in the morning doing it and this will affect the quality of your essays!.† It was getting colder – maybe I should have worn something more instead of my plain white tee-shirt and my rugby shorts. I turned the bend smoothly and now was going through the final two mile stretch. This is usually the hardest part of the race. It depends on the amount of will power I have. This is the stage where the pain intensifies to such an extent that I could hardly feel my shoulders and legs. The only thing that keeps me going is my raw determination, my anger, my will power. â€Å"Mum, God damn it leave me alone!† I remember shouting when she told me to do my work. â€Å"Just go and mind your own business.† I regretted the fact that I shouted. The expression on her face turned to one of utter surprise and disbelief. Her face reddened with anger, â€Å"Why do you think I work so hard?† I remember her saying. â€Å"It's so that you get a chance in life to get educated and make something of your self!† She explained. â€Å"You don't know how hard life is, it's a harsh world out there, if you do not get educated you will probably end up doing a low- paid unskilled labour work, do u want that? This is when I got angry. I hate it when she says that she works just for me! This is when I got upstairs, changed into my training gear and went running! Sweat was dripping from my nose; my breathing was gradually getting heavier, as I ran on the cemented pavement. I was tired, my vision was getting more and more blurry, and all I could see was the headlights of cars as they drove opposite me. There are two different characters in me when I run, one says: â€Å"Come on you fool, what do you want to be a mediocre or the best?, Run, run, and never stop.† I have no trainer to give me encouragement during the hardest part of the race; therefore I have to provide encouragement myself. The other character says: â€Å"Why are your running fool! Why are you going through so much hardship when you could be sitting at home watching television?† There is a constant battle between my two characters when I run. Sometimes my negative character wins and I stop running but in most cases my positive character wins and I finish my race. Just three hundred yards left; this is the part in the race when I increase my speed to such an extent that I loose all my senses in my legs – they go completely numb. The only thing which could keep me going is my determination, my will to succeed and not be a failure. Another two hundred yards; â€Å"Keep running!† I shouted to myself, â€Å"No pain! No pain!† I kept instructing my self – in fact the only thing I could feel was pain. One hundred more yards left: â€Å"You've done it! Come on!† Finally I finished my run -I was outside my house and I was heavily breathing and sweating. Throughout the whole race all I suffered was pain and anguish- there was times when I thought I was going to stop. However I endeavoured to accomplish the goal I had set for myself. Now all I could feel was complete satisfaction. Maybe, if I set the same attitude towards school work and if I finish tasks in time I would be feeling the same level of satisfaction as I am feeling now. I looked up and saw my mother standing in front of me. â€Å"Released all your anger have you?† she asked with a smile on her face. â€Å"Yes, I'm calm now!† I replied. â€Å"Come on then, I'll make you a cup of tea and then you can get started on your essays!† It's bizarre how the whole atmosphere changes after a four mile run.

Poverty Is Not A Country Exclusive Issue - 1164 Words

Poverty, what is it? Poverty cannot be defined by just one definition. Poverty is a serious worldwide issue that is affecting all of our lives in the world. In Fact,Did you know nearly half of the world’s population, more than three billion people, live on less than two dollars and fifty cents a day. Just think, If you were given that same budget could you survive? Would you be able to live the same lifestyle that you do? The answer is most likely no and this is a mind blowing statistic. Statics like these are real eye openers, because they make you think and appreciate just how lucky we are not be living in poverty such as other countries that are rather called, Third world countries. Poverty is not a country exclusive issue, and like†¦show more content†¦Then these people more often will get sick and eventually die. Another huge issue of poverty is lack of education. Without a proper education, the poor will stay in poverty . This happens because without a proper education most employers will ignore the application to the job,because of the lack of knowledge that you may have. More commonly, people with a higher education receive more job opportunities. A 2003 study sponsored by the National Center for Children in Poverty found that in families whose income falls below 200 percent of the Federal Poverty Line children score far below average on reading, math and general knowledge tests. A lack of education perpetuates poverty and breaking this cycle is key to overcoming persistent poverty in the world. That being said, in order for us to eliminate poverty we need to get our students into better education system and take action for our students to learn so the cycle can end. Last but most definitely not least, issue that causes poverty is divorce. Single Parents who have to raise children on their own have a harder time and less resources than a couple who is still married. Typically divorcing or separating mothers are 2.83 times more likely to be in poverty than those who remain married. This being said the parent that usually ends up with custody of the child see a huge drop in their income, which is usually around 52% drop. Consequently , divorce can easily lead to povertyShow MoreRelatedPoverty Is The State Of Being Extremely Poor1618 Words   |  7 PagesPoverty is generally regarded as the state of being extremely poor. While this is true, this state can only be judged as a relation to a given social or economic state. In light of this, a better way to define poverty would be; the state of one who lacks a usual or socially acceptable amount of money or material possessions (Merriam-Webster). Poverty has many faces, changing from place to place and across time, and has been described in many ways. Poverty is hunger. Poverty is lack of shelter. 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