Auditing Sarbanes Oxley

Sarbanes-Oxley Act

Grace Robinson

Auditing I

Professor Ashley Harper

2/20/14

In 1998 Waste Management was accused of reporting more depreciation on its balance sheets (Accounting Degree.org, 2014). This resulted in $1.7 billion in false earnings (Accounting Degree.org, 2014). In 2001, Enron shareholders lost $74 billion, some of its employees lost their pensions, and most of its employees lost their jobs (Accounting Degree.org, 2014). Enron’s CEO Jeff Skilling and former CEO Ken Lay were keeping huge debts off of the balance sheets (Accounting Degree.org, 2014). In return Jeff Skilling received 24 years in prison and Ken Lay died before he was sentenced (Accounting Degree.org, 2014).In 2002, WorldCom decided to capitalize instead of expense its costs (Accounting Degree.org, 2014). They also had fake journal entries which exaggerated its revenue (Accounting Degree.org, 2014). WorldCom caused 30,000 jobs to be lost, and its investors lost $180 billion (Accounting Degree.org, 2014). America’s economy was on a downward spiral, and Congress had to do something quickly. Within weeks of the WorldCom scandal, Congress passed the Sarbanes Oxley Act of 2002 (Accounting Degree.org, 2014).

Sarbanes-Oxley had created a lot of new regulation to minimize the corporate fraud. Section 302 affects all corporations. Section 302 requires that all financial reports have certain certifications. Officers must sign that they have reviewed the report, and the report does not contain any material untrue statements or material omission or be considered misleading (A Guide To Sarbanes-Oxley Act, 2006). Section 302 also requires that the financial statements and related information fairly present the financial condition and the results in all material respects (A Guide To Sarbanes-Oxley Act, 2006). Under Section 302, the signing officers are responsible for internal controls and they must evaluate the internal controls within the previous ninety days and have a report on their findings...