English 135
Instructor: Fawn-Bragg
David Ross
15 February 06
Sarbanes-Oxley Act
The "Sarbanes-Oxley Act" is a comprehensive corporate reform package that was signed into the US law on July 30, 2002. The passage of the Act has been heralded by some as a historic occasion?calling it the most significant accounting legislation since 1933, while others have severely criticized the Act either as a "too little too late measure" or as a hasty knee jerk reaction to a temporary situation. Without a doubt, the Sarbanes-Oxley Act is the single most important piece of legislation affecting corporate governance, financial disclosure and the practice of public accounting since the US securities laws of the early 1930s. And, it is clear that public companies and the accounting profession have made tremendous progress in meeting the rigorous requirements of this legislation. In this paper we shall discuss the business conditions that led to the passage of the Act, the accounting problems that caused the Act to be passed, the advantages and disadvantages of the Act and the effect of the Act on the future of the Accounting profession. In the end I shall state my personal opinion about the Act.
Between December 2001 and July 2002, four major US corporations?Enron, Global Crossing, Adelphia and WorldCom filed for bankruptcy?six of the largest corporate bankruptcies in U.S. history (Recine 1535). These companies had hidden their true financial health from creditors and shareholders until an inability to meet financial commitments forced them to restate earnings that revealed massive losses. In most cases, the top most management had also indulged in massive fraud, insider trading and cashing in of stock options. The financial collapse of such larg ...