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Date Submitted: 02/23/2015 06:46 PM
Corporate Fraud Protection
S. Slade Laneer
ACC/561 - Accounting
August 25, 2014
Susan Hurley
Corporate Fraud Protection
This paper will address the increased need of regulatory protection from corporate fraud in today’s business world, which is necessary due to gross negligence and mismanagement of funds by certain corporations in our recent past. Intensive investigations eventually proved several organizations committed financial fraud as well due to falsification of financial documents. Particular attention will be given to the Sarbanes-Oxley Act of 2002 (SOX), which was formed and passed into law on July 30, 2002 as a result of the findings of the investigations that ensued.
The Sarbanes-Oxley Act (SOX)
The Sarbanes-Oxley Act is commonly referred to as “SOX.” Its name is derived from its sponsors, Senator Paul Sarbanes and U.S. Representative Michael G. Oxley. SOX was enacted because of financial scandals involving organizations such as Enron, Lehman Brothers, and WorldCom, just to name a few. These scandals resulted in investors losing enormous amounts of money and also collapsed faith in the stock market, which caused tremendous financial problems worldwide. As a result, congress had to act and act fast. In the past, top managers did not have to certify that financial documents were accurate, external financial auditors were given limited power, and penalties for fraud were not all that strict. This all changed with the arrival of SOX. The three major changes SOX brought about in the corporate world required top managers to be required to certify the accuracy of financial documents, gave more power to external auditors, and substantially increased penalties for fraudulent activities (Kimmel, Weygandt, & Kieso, 2009). Additionally, “It has helped to shape the focus of state courts and regulators on the proper application of other fiduciary duty laws. It has raised the public consciousness of corporate governance” (Peregrine, 2012, para. 5)....