The Sarbanes-Oxley Act (2002)

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INTRODUCTION On July 30, 2002, President George W. Bush signed the Sarbanes-Oxley Act, making it a United States federal law. This bill was enacted in response to a number of major corporate and accounting scandals, some of which included those affecting Enron, Tyco International, Adelphia, Peregrine Systems, and WorldCom. The Sarbanes Oxley Act was widely supported by the United States government. The bill was approved by a vote of 423-3 by the House, and 99-0 by the Senate (Those Guys! Sabanes & Oxley, 2002-2006). President George W. Bush signed it into law stating it included “the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt” (Bumiller, 2002). CREATORS OF THE SARBANES-OXLEY ACT OF…show more content…
When signing the bill, President George W. Bush vowed stiff punishment for corporate wrongdoers. Mr. Bush bluntly threatened, “No more easy money for corporate criminals, just hard time.” TITLES OF THE SARBANES OXLEY ACT The Sarbanes-Oxley Act contains eleven titles that describe specific mandates and requirement for financial reporting. There are several sections to each of the eleven titles. 1. Public Company Accounting Oversight Board Title 1 consists of nine sections and establishes the PCAOB. It also creates a central oversight board tasked with registering auditors, defining the specific processes and procedures for compliance audits, inspecting policing conduct and quality control, and enforcing compliance with the specific mandates of the act. 2. Auditor Independence Title 2 consists of nine sections and establishes standards for external auditor independence, to limit conflicts of interest. It also addresses new auditor approval requirements, audit partner rotation, and auditor reporting requirements. It restricts auditing companies from providing non-audit services for the same…show more content…
In section 109 of title o1ne, it explains that the PCAOB will be funded by the fees to be paid by all public companies. The PCAOB is granted investigative and enforcement powers to oversee the accounting industry and discipline auditors. It also has the authority to regulate auditors of public companies, set auditing standards, and investigate violations of accounting practices. In section 104 of title 1, it explains that all firms will be audited at least once every three years, and annual quality reviews will be conducted for firms that audit more than one hundred issues per year. The PCAOB is designed to be a five member board. The five members of the PCAOB Board, including the Chairman, are appointed to staggered five-year terms by the Securities and Exchange Commission (SEC), after consultation with the Chairman of the Board of Governors of the Federal Reserve System and the Secretary of the Treasury (http://pcaobus.org/About/Pages/default.aspx). Currently the PCAOB only consists of four members, and there isn’t a definite date as to when they will instate another member. The current four members are as
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