Sarbanes Oqley Act

SARBANES OXLEY ACT 2002

INTRODUCTION

Accounting Profession is seen as a profession which holds a lot of trust and independence. It has got an extensive education process, provides service to community, and has got code of Ethics for its members. There has been governing bodies such as Fiji Institute of Accountants and CPA in Australia which regulate and make up the profession to work with high degree of independence.

The accountants and auditors are required to follow the rules and regulations implemented by these governing bodies.

Recently, the accounting profession has been put under challenge. There has been major collapses of big organizations like Enron and WorldCom in United States and HIH Insurance in Australia during 2001-2003. An accounting firm Auther Anderson was related to the major impact on the credibility of the profession and the reduction of public trust.

There had been major collapses of organizations in 1980,s but it seems that stakeholders that are involved have not improved. The accountants and auditors are involved in the collapse of major organizations because of greed and their own benefit. Management are supposed to look into the interest of the shareholders are filling their own pockets with large remuneration packages. There have been agency problems, independence problems and the list goes on.

There have been a lot of changes in the accounting profession after the collapses of organizations like Enron and WorldCom. Sarbanes Oxley Act was implemented in July 2002 because of the failure of major firms like Enron and WorldCom.

This paper is going to focus on the reasons why there was failure in Enron and WorldCom. It also discusses about the Sarbanes Oxley Act and whether it is going to avoid future collapses of organizations.

Enron Failure

Enron was founded by Chairperson Kenneth Lay as a natural gas company in 1985 in Texas USA. Enron became a well-known company in other countries and was increasingly becoming...