Answer to Question #199438 in Management for Chriz

Question

Summarize and make a simple analysis on the Sarbanes-Oxley Act of 2002, A US Federal Law also known as the "Public Company Accounting Reform and Investor protection Act" and "Corporate and Auditing Accountability. Responsibility, and Transparency Act"

Answer 1

The Sarbanes–Oxley Act of 2002 (Pub.L. 107–204, 116 Stat. 745, enacted July 30, 2002), also known as the "Public Company Accounting Reform and Investor Protection Act" (in the Senate) and "Corporate and Auditing Accountability, Responsibility, and Transparency Act" (in the House) and more commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law that set new or expanded requirements for all U.S. public company boards, management and public accounting firms. A number of provisions of the Act also apply to privately held companies, such as the willful destruction of evidence to impede a federal investigation.

           The eleven-section law was passed in response to a series of significant business and accounting scandals, including Enron and WorldCom.The bill's parts include the board of directors' responsibilities, increases criminal penalties for some wrongdoing, and compels the Securities and Exchange Commission to adopt laws to clarify how public corporations operate. When the accounting profession founded the Panel on Audit Effectiveness, as requested by the Securities and Exchange Commission, the accounting profession faced a crisis of confidence. The panel was in charge of examining and examining how independent financial statement audits are conducted, as well as assessing audits in terms of public interest. In December 2001, the Enron Corporation filed for bankruptcy after admitting to accounting errors. It was also followed by the WorldCom hoax, in which the business exaggerated its earnings. As a result, a number of corporations had to revise their financial accounts. Finally, the Securities and Exchange Commission authorized an inquiry into the accounting methods of numerous corporations., In the latter half of 2001 and the beginning of 2002, this created investor concern, causing a shake-up in the already shaky financial sector. It resulted in a credibility issue for the accounting profession.