Sarbanes-Oxley Act of 2002 Sarbanes-Oxley Act of 2002 Abstract The paper examines the Sarbanes-Oxley Act of 2002 that was adopted to restore confidence in accounting firms and businesses. Under this act that was signed as a response to numerous corporate and accounting scandals, the companies are required to make changes in order to ensure that their business practices are conducted with ethics, honesty and integrity. The present paper outlines the details of the Sarbanes-Oxley Act of 2002 and explores its relation to the ethics, and companies corporate responsibility for ethical behavior. Sarbanes-Oxley Act of 2002 Introduction The Sarbanes-Oxley Act of 2002 (Pub.L. 107-204, 116 Stat. 745, enacted 2002-07-30), also referred to as the public company Accounting Reform and Investor Protection Act of 2002. This act is a United States federal law that was enacted on July 30, 2002 as a response to numerous corporate and accounting scandals.
The scandals affected Tyco International, Enron, Adelphia, WorldCom, and Peregrine Systems. The companies suffered losses for billions dollars because their share prices collapsed and shook the confidence of the public in the nation’s securities markets. According to the President George W. Bush, who signed this law, the act included the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt. (Bumiller, 2002) The Sarbanes-Oxley Act of 2002 was created in order to establish the enhanced and new standards for all United States public company boards, public accounting companies, and management companies. The Act comprises of 11 sections, or titles, which include the most important things related to the corporate governance, beginning with additional Corporate Board responsibilities and ending with criminal penalties applicable to the companies. Under this Act there was also established a new quasi-public agency (The Public Company Accounting Oversight Board) which was made responsible for overseeing, inspecting, regulating, and disciplining the companies.
The Essay on Nature of Auditing and the Public Accounting Profession
1. Auditing neither creates goods nor adds utility to existing goods and therefore does not add value to business. Auditing exists only because it has been legally mandated. Auditing exists because it is needed by the company. It is beneficial to users who need assurance if their financial statements reflect economic conditions that occurred in a period. Without reliable information, companies ...
The Sarbanes-Oxley Act of 2002 also regulates the issues related to the corporate governance, auditor independence, internal control assessment, as well as enhanced financial disclosure. Ethics and the Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 was developed and adopted by the U.S. government as a solution to unethical business practices. The companies implement this act in order to ensure that their business practices are conducted with ethics, honesty and integrity. So, in order to understand how the Sarbanes-Oxley Act of 2002 affects companies ethics, it is important to examine the act more thoroughly. The Sarbanes-Oxley Act of 2002 places a strong emphasis on applying ethics and integrity within the companies. According to Doyle et al., the major components of the Sarbanes-Oxley Act of 2002 address: External auditor independence and quality standards; Revised reporting structure as an independent, nongovernmental board overseeing the audits of public companies; Management responsibility for filing fairly presented financial statements; Management accountability for internal controls over financial reporting and disclosures; Audit committee oversight of the audit process and monitoring of financial results and issues; Criminal penalties for fraudulent activities, including defrauding shareholders. (Doyle, Graunke, Hildebrandt, Otto, & George, 2008) From here it follow that the act was predominantly adopted in order to restore lost investor confidence in businesses and public accounting companies.
The Term Paper on Managing Company Ethics and Social Responsibility
L’Oreal is the world’s top cosmetic products manufacturer. In 1907, it was founded by Eugène Schueller, a young chemist who developed a hair dye formula which was safe for people. He named the products as “Aurelióne” and offered to the hair salons in Paris. Within 2 years, he registered his own company as “La Societe Franeaise des Teintures inoffensives pour Cheveux”, which soon became L’Oreal. In ...
The act leads to numerous organizational changes within the companies, because it affected the leadership accountability, management, oversight and responsibility within the companies. The Sarbanes-Oxley Act of 2002 also forces the companies to make changes in the processes that influence the perspective in materials management leadership practices, for example, the processes that place emphasis on ethics and a culture of business integrity, ensure that the companies use appropriate process internal controls, use meaningful metrics to assess the companys performance, enhance and optimize the technologies for effective and efficient processes, require timeliness and information integrity as a standard, define business plans that appropriately align processes, people, and technologies, assess risk and reduce the risks to the lowest possible minimum, achieve and maintain companys performance, and provide customer service essentials, to mention a few (Doyle, Graunke, Hildebrandt, Otto, & George, 2008).
Corporate Code of Ethics as Self-Regulation Under the Section 406 of the Sarbanes-Oxley Act of 2002 the companies are obliged to disclose whether they have adopted a code of ethics for their senior financial officers, and in case they havent adopted it, to explain why. As far as only few companies will decide to provide the explanation why they do not have the code of ethics, this regulation reduces the number of companies that have no code of ethics, to minimum. In addition, it is also more likely that these companies will choose to develop the code of ethics, in order to avoid possible problems and difficulties. What concerns the companies that already have the code of ethics; they will likely to review them to make the codes comply with the requirements of the Sarbanes-Oxley Act of 2002.
Under this act, the companies have also to disclose in case they make some changes to the code of ethics, or grant a waiver under its code. It should be noted only that the corporate codes of ethics are voluntary mechanisms used by the companies for self-regulation purposes, and they were widely spread before the act. It remains unclear whether the code of ethics promote good conduct among the companies employees, but it is obvious that corporate codes of ethics educate the employees about standards of behavior and serve as a management tool because they focus the attention of the managers and directors of the company on the ethical issues. Common Content of Codes of Ethics According to the Section 406 of the Sarbanes-Oxley Act of 2002, the code of ethics is basically defined as a written standard aimed to encourage honest and ethical conduct that includes the ethical handling of actual or apparent conflicts of interest between professional and personal relationships. The code of ethics also comprises the standards reasonably necessary to promote full, fair, accurate, timely, and understandable disclosure in the periodic reports required to be filled by the issuer; and compliance with applicable governmental rules and regulations. (The Sarbanes-Oxley Act of 2002, Section 406) In such a way, when the company develops or revises its code of ethics, it is important to assure that the code addresses conflicts of interest, honest conduct, disclosure in periodic reports, and compliance with the applicable regulations.
The Term Paper on Business Ethics (Nestle Company)
Introduction Nestle is the world’s dominating health and nutrition company which is still now committing their promises to the people every day, everywhere by promising ‘Good Food, Good Life’ to their consumers to enhance lives with good foods and beverages. The development of Nestle was formed in the 1905 through the mergers and acquisitions of the Anglo-Swiss Milk Company, by the brothers George ...
The code of ethics should be also aimed to deter wrongdoing. There may be several formats the companies use for their codes of ethics, such as the procedures of codes, or statements of credo which are based on the values to the detailed rules in the companies (How Sarbanes-Oxley Section 406 Has Impacted Corporate Ethics, 2005).
Basically, the corporate codes of ethics encourage the employees to behave honestly, to obey the law, to show loyalty to the company, to keep confidentiality, to show respect and to act fairly. Some codes of ethics also involve enforcement and administration. Before the companies begin to develop or make changes in their codes of ethics, they will need to answer the following questions: why do they have to develop the code of ethics and what the company wants to achieve in this code. Some companies, for example, develop the code of ethics simply because they do not want to explain why they do not have the code.
These companies may choose any kind of the code, which adequately fits the requirements of the Sarbanes-Oxley Act of 2002. Sample codes of ethics are provided by Financial Executives International (www.fei.org/download/CoEmodel.doc).
The Research paper on Public Relations Ethics Code Ethical
As Michael Winkleman described, public relations professionals and educators are currently engaged in a vigorous discussion of the role of ethics within the profession and the means by which ethics can be taught to both public relations students and professionals. According to Winkleman, the rise in concern over ethical issues can be traced to the reaction of the profession to events in the 1980 ...
However, there may be companies that desire to develop a code of ethics, which gives them more than simply a sample code. For these companies it is important to understand the possibilities offered by the code of ethics. The code of ethics can teach the companies or the employees to find solutions to the complicated ethical situations and to be treated as a general statement of the expectations the company has concerning its employees. Therefore, the effectiveness of the code of ethics is obvious. What concerns the adoption, as it is claimed by the author of the article How Sarbanes-Oxley Section 406 Has Impacted Corporate Ethics (2005), the Section 406 of the Sarbanes-Oxley Act of 2002 doesnt require the adoption of the code of ethics, but as it requires the issuer to explain the reason for his omission, Section 406 makes it difficult to ignore.
The section of the act also doesnt impose civil liability for a failure to comply. Nothing in the legislative history indicates that Congress intended to impose additional liability or allow a private cause of action. In fact, other provisions of Sarbanes-Oxley contain specific safe harbors from liability, suggesting that companies can be liable if they fail to comply with the safe harbor.” (How Sarbanes-Oxley Section 406 Has Impacted Corporate Ethics, 2005) However, it should be taken into account that the company will be held liable over its code of ethics only in case the company’s conduct constitutes the violation of Rule 10b-5. Conclusion In conclusion it may be said that the Sarbanes-Oxley Act of 2002 was adopted in order to restore confidence in accounting firms and businesses, because it was developed and signed as a response to numerous corporate and accounting scandals. Under this Act the companies make changes in order to ensure that their business practices are conducted with ethics, honesty and integrity. The Act impacts management, leadership accountability, oversight and responsibility within the companies.
Yet, it should be noted that the act and namely the Section 406 of the act didnt cause significant changes in the content of the corporate codes of ethics used by the companies. In general, the companies that modified or adopted new codes of ethics in compliance with the Sarbanes-Oxley Act of 2002, generally follow the statute’s wording, but the law contains only minimum, baseline provisions and does not dictate detailed, substantive content. (How Sarbanes-Oxley Section 406 Has Impacted Corporate Ethics, 2005) However, since the Act has been brought into life, the code of ethics became more prominent and more transparent. The codes of ethics became readily available to the company’s corporate employees, corporate stakeholders, investors, regulators, advocacy groups, and the public at large. Therefore, it is possible to assume that the most important impact of the Section 406 is transparency of the codes of ethics in the company’s daily business practice. References Bumiller, E. (2002, July 31).
The Review on Business Ethics Companies Ethical Corporate
Introduction Background The literature being studied is an article written by Hellen O's ullivan, the Director of Scientific Methods Australia. The article entitled "Business ethics are set to set to stage a comeback" was published on the 75 th page of The Australian Financial Review on the 6 th February 1990. Literature Review Basically, the article discussed several important issues about ...
Bush Signs Bill Aimed at Fraud in Corporations. The New York Times , p. A1. Doyle, F. F., Graunke, C. L., Hildebrandt, D.
J., Otto, R. K., & George, M. C. (2008).
Act with ethics. Retrieved March 6, 2008, from http://www.matmanmag.com/matmanmag_app/jsp/article display.jsp?dcrpath=MATMANMAG/PubsNewsArticleGen/d ata/Back%20Up/0507MMH_FEA_Compliance How Sarbanes-Oxley Section 406 Has Impacted Corporate Ethics. (2005, December).
Retrieved March 6, 2008, from ttp://ww.bowne.com/securitiesconnect/details.asp?s toryID=1233,.
