Unethical Behavior Article

Purpose of the Sarbanes-Oxley Act of 2002

Joanna Riggins

ACC/291

May 13, 2013

Lori Haines

The Sarbanes-Oxley Act is a law that was created in July 03, 2002 by the federal government. The name was created based on the Paul Sarbanes, Maryland State Senator, and Michael Oxley an Ohio State Representative. The purpose of the Sarbanes Oxley Act of 2002 was to provide a transparency for public companies and accounting firms financial records. This bill was formed based on many corporate scandals that cost investors, employees billions of dollars and diminished the public's confidence in the nation's securities market.

In accordance with the Sarbanes-Oxley Act, the financial status of a public company must be current and available to the public. Balance sheets must be published, and the financial standing must be approved and signed by the Chief Executive Officer of the company. These guidelines are in place to safeguard the security of assets a company reports, and to attract investors to have more confidence when deciding to invest their money in a company. There have been several known scandals in recent history, even after the Sarbanes-Oxley Act was set in motion.

The Accounting Firm of Klynveld, Peat, Marwick, and Goerdeler, was involved in a scandal in 2003. In that year, KPMG was under investigation for accounting fraud by the U.S. Attorney's Office. In 2005, KPMG admitted to creating fake tax shelters for their wealthy clients, this saved the clients $2.5 Billion in taxes during the 1990's. To avoid being indicted KPMG agreed to pay $456 Million however, the 2.5 billion the clients saved were not required to pay any the funds back to the government. This scandal came from the need for KPMG to keep these clients in their firm, anyway they could even if it meant breaking the law to do so.. It was a win-win for both KPMG and their clients ("Corporate Narc", 2005). Greed makes people do things they normally they may not even consider, however...