The purpose of the SOX Act in response to the fraudulent and misleading activities of large corporations such as Enron, Health South, Xerox, Global Crossing, and almost one thousand publicly traded companies. Fraud is defined as “a dishonest act by an employee that results in personal benefit to the employee at a cost to the employer” (Kimmel, Weygandt, & Kieso, 2011). The afore mentioned companies and many others committed fraud when they willingly published false and/or deceptive financial statements making their companies look like they were making huge profits, therefore causing their stock prices to soar and enticing the public to by more and more shares of their companies. Unfortunately, when the truth came out, the fraudulent actions of a few resulted in the loss of almost $5 trillion of stock market value and an undetermined amount for stockholders. Because of this fraudulent action, Congress had no choice but to intervene and pass legislation that would curtail this illegal
When corruption occurs it damages the reputation of the employees and the business. Society relied upon this firm to assist in making them money but the firm was more concerned with their bottom line. Many of the individuals doing business with these firms lost their life savings and destroyed some of the trust that investors have with the Wall Street firms. It makes people have second thoughts about investing in the stock market. Another effect this unethical behavior had on these organizations been they agreed to pay a penalty of over $1.43 billion dollars as compensation to the victims.
.) Banking panic are ridiculous, but many believed that the debt caused by farms and the U.S encouraging banks of any kind could’ve started a fire that later spreads and causes panic that allowed the stock market to crash. (Romer,
Sarbanes-Oxley Act Article Analysis Susana Hernandezvargas ACC/340 June 07, 2013 David De La Calzada Sarbanes-Oxley Act Article Analysis There have been multiple business scandals surrounding internal control such as those associated with WorldCom, Enron, and many others. These events led to Congress passing the Sarbanes-Oxley Act of 2002. The commonality in all of these cases was the false reporting of financial transactions. In addition, all these company’s shareholder’s experienced heavy losses as a result of transactions being misinterpreted. With the Sarbanes-Oxley Act in place investors are now protected through the improvement of reliability and accuracy of corporate disclosures made in accordance with the securities laws money (Bagranoff, Simkin, & Strand-Norman, 2008).
Since the unemployment rate was high and businesses were failing, the stock market went through a dramatic crash causing many people and companies to go bankrupt. The stock market crash was a major cause of the Great Depression because it had a large role in the country’s economy, and with the market crashing the economy crashes as well. Out of many factors and causes, these three were the most that influenced the beginning of the Great Depression. As these causes are linked together, they caused a chain reaction of negative results on the country’s economy. So if anything goes wrong with these factors, it may lead to another recession or
Sarbanes Oxley came into force mainly due to the financial scandals committed by corporate giants like Enron, WorldCom, etc. Since then the Sarbanes Oxley act had been the most important piece of legislation which seriously affects the corporate governance, financial disclosures and total accounting pattern in the companies. After the Sarbanes Oxley act came into force, accounting system and financial statements disclosed by the companies made tremendous progress. This improvement has been possible due to rigorous requirements stated in the Sarbanes Oxley act. Due to this improvement it helps to protect investor confidence in the companies and the US legislature as well.
Article Analysis Over the past several years, unethical business practices, specifically in the accounting and financial categories, have made the news headlines frequently. Corporate America has been hit by greed and an overwhelming desire to make money at any cost, including sacrificing strong ethics and a proper moral code. Unethical situations include treatment of employees and stakeholders, manipulating financial reporting, and selling known unsafe products. Manipulating financial reports most often begins at the top management within a company (Clement, 2006) in an effort to boost salaries for those senior executives. Hiding accurate earnings, reporting inventory sold when it was not, and recording erroneous cash flows are just some of the ways that corporations have used to side step proper ethics.
The mortgage crisis and bank bail out of 2008 were at the fault of the American government. Society, public opinion and the mass media were largely affected. The jobs of the Congress were also turned around since a lot of focus has been on fixing the banking and mortgage issues due to the meltdown from 2008. As a result our society has suffered a major economic downturn. In some areas, the government popularity level has lowered significantly.
What happened that we needed to have the bailouts? Mortgagers and bankers were making high-risk loans that they could not cover in case of default to increase their own profits, the U.S. government was forced to buy the bank loans since lenders would not lend to each other because financers were taking their money out of the money market as well as credit swapping, trigging a recession crisis. (Stout, 2008) This fueled the OWS anger penalizing taxpayers to pay for the corruption within our financial institutions and sending our economy into a recession, causing citizens to lose their houses, jobs, and insurance. President Obama signed the DODD-FRANK Wall Street Reform and Consumer Protection Act in July of 2010. This act within its 2500 pages requires certain financial derivatives traded in markets under the subject to government regulation and oversight.
According to Clement (2006) unethical behavior in business is a growing concern. “In recent years, the business news in the United States has been rife with reports of misconduct by American corporations. The most widely publicized of these cases may be the accounting fraud at Enron and what was then MCI WorldCom; however, less trumpeted incidents of misconduct are troubling, as well. Examples of such lesser known events include consumer fraud at Prudential Financial, discriminatory practices at Morgan Stanley, and antitrust activity at DuPont. Given the recent misbehavior in the U.S. business world, a reasonable person might wonder just how unethical American business really is.