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This 5-page paper discusses the Sarbanes-Oxley Act of 2002, its impact on information systems, accounting controls and internal controls, and its effectiveness. Bibliography lists 7 sources.
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5 pages (~225 words per page)
File: AS43_MToxlesarb.rtf
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as the Public Company Accounting Reform & Investor Protection Act of 2002 was passed to provide an overview of financial requirements, as well as clarity on areas that might be
questionable (Zameeruddin). The act has many provisions, most notably, the creation of a Public Company Accounting Oversight Board to help enforce professional standards and maintain ethics and competency within the
accounting profession; the further independence of auditing firms dealing with public companies; an increase in the penalties for corporate wrongdoing and increasing corporate financial disclosure transparency (Zameeruddin).
But SOX didnt come from nowhere. Following the 2001 debacle of Enron Corp. in which the "new economy" firm was caught lying about its profits
while auditor Arthur Andersen looked the other way, the act was introduced to help strengthen the audit process (Cullinan, 2004). Also contributing to the bills passage were similar accounting scandals
at companies Tyco, Worldcom and Adelphi (Cullinan, 2004). Because these accounting frauds misled the investing public, they cost stakeholders and shareholders billions of dollars in losses, with the end result
being that investor confidence took a large hit. SOX was passed to try to prevent more accounting scandals, which would lead to further erosion of investor confidence. The main rollout
for major corporations took place in 2004 (Borrus, 2005). Impact on Accounting Controls The Act, for the most part, has
tightened accounting controls. Larger companies ended up spending millions to ensure that accounting personnel was being examined every step of the way during the financial reporting process (Borrus, 2005).
Section 404 of the Act, which details dealing with internal accounting controls, ended up rooting out many corporations difficulties and gaps in such control (Borrus, 2005). Though the costs
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