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A 15 page paper. Sarbanes-Oxley Act of 2002 was passed in response to the many corporate accounting scandals in private sector corporations. The most contentious part of the Act was section 404. This essay will focus on Section 404, including costs and benefits, pros and cons. Data are included. Bibliography lists 14 sources.
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15 pages (~225 words per page)
File: ME12_PG699182.doc
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that required high executives to sign off on financial reports. This meant they could not claim they knew nothing about what was in the report. The most contentious part of
the Act was section 404 which deals specifically with auditing. The internal auditor must state the records are fair and that the financial process is fair and accurate. Management must
assure these facts. This essay will focus on Section 404, including costs and benefits, pros and cons. Sarbanes-Oxley Act In 2002, the U.S. Congress passed the Sarbanes-Oxley
Act in response to the many corporate accounting scandals in private sector corporations. Most specifically, in response to the Enron, Arthur Anderson, and WorldCom debacles. These companies and others were
involved in clever fraudulent accounting schemes that made the organizations seem to be more profitable than they were. The public was outraged and drove Congress to do something about it,
to get more control over accounting practices and to implement severe punishments for corporate executives, auditors, and boards of directors. The public also wanted whistle-blowers protected. Sarbanes-Oxley governs publicly held
companies but parts of the law is also applicable to nonprofit organizations. Any who receive any type of federal funding must adhere to many parts of this huge act. Hamel
(2003) commented that the sweeping criminal provisions in the act apply to everyone, including nonprofit organizations. For example, the language that discusses obstruction of justice by intentionally destroying certain types
of documents applies to all organizations. The Sarbanes-Oxley Act imposes new federal regulations on auditors of public companies. It also makes significant changes in the responsibilities of corporate officers, directors,
and financial service professionals (Heinz, 2003). The Act includes mandates for internal controls and audits, increases the liability for corporate directors, and for accounting professionals. Further, it restricts the types
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