Introduction
The recent corporate scandals that have occurred at Enron, World.com and Tyco, to name a few, have done more than anger investors and the public. To the relief of many, these corporate scandals have spurred the government to pass legislation that significantly impacts the manner in which organizations present their financial statements. The Sarbanes-Oxley Act passed in 2002 sought to combat fraud by "improving the reliability of financial reporting, and restoring investor confidence" (Wagner, 2006, p. 133). Given the fact that Congress has not passed substantial legislation impacting the financial reporting of the organization since the 1930s, the passage of the Act clearly has notable ramifications for change. In an effort to assess that change, this investigation considers an overview of the Act and how it will impact corporate financial reporting.
Sarbanes-Oxley?An Overview
A precursory overview of the Sarbanes-Oxley Act demonstrates that there are a host of new provisions that have been developed for corporate financial reporting and responsibility. Among the most notable parts of the Act is Section 404 which requires "various internal controls and procedures for financial reporting such as the retention of documents (including email). Corporations must document their internal management controls, and the company's independent auditor must sign off on their effectiveness" (Scott, 2004, p. 48). In addition, the Act contains a "whistleblower provision" which requires companies to have a secure an anonymous system for whistleblowers to report company fraud (Scott, 2004). Further, the Financial Accounting Standards Board (FASB), which oversees accounting procedures for all organizations, "must have a majority of members not affiliated with acco ...