Law 421 - Memo Article Review

University of Phoenix Material

Article Review Format Guide

MEMORANDUM

UNIVERSITY OF PHOENIX

DATE: March 18, 2012

TO: Tad Davis

FROM: XXXXXX

RE: SOX Unraveled

ARTICLE SYNOPSIS

In the aftermath of recent accounting fraud from companies such as Tyco, Enron, and WorldCom, the government enacted safeguards by empowering oversight of several governing bodies to maintain control to thwart theft, fraud, and unauthorized use of funds. Internal controls consist of credible financial reporting, efficient and effective operations and compliance to regulatory bodies and laws. In that vein the government passed the Sarbanes-Oxley Act for publicly traded companies. Internal controls prevent unauthorized use and acquisition of funds and foster good business practice and viability. The Sarbanes-Oxley Act (SOX) enacted by Congress in 2002, introduced major reform to financial accounting practices and corporate governance. A number of deadlines were set for compliance and the standard of requirements around corporate compliance and the mitigation of internal controls of operations (A Guide to the Sarbanes-Oxley Act, 2006). The net effect however, goes beyond its components – the fundamental principles put in place for governance were largely unchanged so people were still asleep at the switch and SOX made it clear that people cannot be asleep anymore (Maleske, 2012). SOX enforced greater control of financial reporting, and increased vigilance among senior executives. It imposed auditing, reporting, disclosure of ethics requirements and created internal reporting and whistleblower structures upon Wall Street (Maleske, 2012, p. 1). Boards are now more focused as their responsibilities have shifted and SOX encourages acceptance of corporate codes and ethics, created PCAOB (Public Company Accounting Oversight Board) and legal oversight.

LEGAL ISSUE

Several principles of internal control are set in...