Discuss the impact of Sarbanes-Oxley on a company’s internal controls. Be sure to define internal controls and discuss the basic principles for assessing internal controls.
Responses
In need of a 125 response/discussion to EACH of the following forum posts. There are (2) different Forum posts. Agreement/disagreement/and/or continuing the discussion. The two interactive posts should each be substantial, relevant, and engaging. Replies to classmates should include direct questions. In-text citations and references may be in APA format. Original forums discussion/topic post is as follows: (Use/Cite references to support your ideas)
Chapter 7 of the attached textbook have been used this week.
FORUM POST 1:Discuss the impact of Sarbanes-Oxley on a company’s internal controls. Be sure to define internal controls and discuss the basic principles for assessing internal controls.
Hello everyone,
According to Sarbanes-Oxley subsection 302, internal controls refer to “disclosure controls and procedures”. Internal controls re defined as “controls and procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms” (Complete Guide to Sarbanes-Oxley: Understanding How Sarbanes-Oxley Affects Your Business. Chapter 7 pg 200). Broken down, internal controls are set by a company, specifically a CEO/CFO that make sure information is made available for certain time periods designated.
There are two basic principles for assessing internal controls. Management must have a plan to evaluate any possible material misstatement. Secondly, management must evaluate potential risks in financial reporting.
Enron was an energy company based out of Houston, Texas that was considered a “new breed” of American energy. Before filing for bankruptcy in 2001, Enron dealt in gas and oil, paper and electric and was one of the biggest such companies of the time. Prior to the Sarbanes-Oxley Act, the oil and gas industries were deregulated by the government. This allowed for fair competition in the field, but without a proper control system it also allowed companies to misrepresent earnings reports, act fraudulently and embezzle funds. Though the SOX Act wasn’t set into play until after 2002, the lack of the act lead to Enron and other companies to easily manipulate financial reports and corporate fraud.
FORUM POST 2:The Sarbanes-Oxley Act of 2002 (SOX) was enacted in response to a number of accounting scandals in major corporations that resulted in the loss of billions of investor dollars. Choose one accounting scandal that precipitated this legislation and discuss whether or not internal controls (or lack thereof) contributed to the scandal..
Good Evening
There have been lots of scandals surrounding the Sarbanes-Oxley Act (SOX) since it was enacted in July 2002. One of the more well-known scandals is Enron. Enron bought and sold gas and oil futures, built oil refineries and power plants, and became one of the world’s largest pulp and paper, gas, electricity, and communications companies.
Of the many issues Enron had, the biggest, in my opinion, was the lack of internal controls. Basically, they were a company investing and trading in the world of energy. Enron’s accounting firm, Arthur Anderson, created false financial reports – which resulted in bankruptcy. The firm’s asset reports were inflated, fraudulent, even nonexistent. Because of this, tons of employees and investors lots a lot of money – millions of dollars. If Enron’s higher-ups were watching their employees as closely as they should have, they would have noticed that money was missing, and fraud was happening right under their noses.
Resources:
https://www.thebalancesmb.com/sarbanes-oxley-act-and-the-enron-scandal-393497
subject: Accounting
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