Global Research

Sarbanes-Oxley Act Review

LENORA GAINES DAVIS

Law 421

January 14, 2013

Michael Carrozzo

Sarbanes-Oxley Act Review

Enron, located in Houston, TX, was considered one of a new breed of American companies. It bought and sold gas and oil futures. It built oil refineries and power plants. It became one of the world's largest pulp and paper, gas, electricity, and communications companies before it bankrupted in 2001

In December 2001, the Enron Corporation filed for bankruptcy. This company had exaggerated their earnings and was facing serious and dangerous accusations. Enron had assets of nearly 63 billion dollars and they turned out to be the largest fraud case in the United States. The company stock at one time was around $75.00 a share and the day of Enron’s fall this company stock plummeted down to 72 cents. Now, I believe that this charade would not have gone on for so long if the yearly audit visits by the Arthur Anderson Accounting Firm. It was easy for the members of the Enron Corporation to fraud their investors because of the lack of laws that would protect the investor and hold the accounting firm accountable for their lack of hard work.

Enron misrepresented their earnings reports to the shareholders and the employees. While they were doing that they encouraged their employees to invest their money back into the company stock only. In order to cut down on the incidence of corporate fraud, Senator Paul Sarbanes and Representative Michael Oxley drafted the Sarbanes-Oxley Act or "SOX" prior to 2002. After drafting this act, both decided not to run for re-election in 2006. The intent of the SOX Act was to protect investors, and really all stakeholders in a business firm, by improving the accuracy and reliability of corporate disclosures, such as earnings reports, pursuant to securities laws and regulations.

The SOX Act holds company CEO's and CFO's responsible for the information presented by their company in financial statements. It created...