The Effects of the Sarbanes-Oxley Act

Running Head : Sarbanes Oxley

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Part I . Sarbanes Oxley

The Sarbanes-Oxley law was enacted in 2002 after several corporate scandals led to the fall of some of the biggest companies in corporate America , among them Enron and MCI that also brought down Author Anderson , one of the world 's biggest accounting firms . Owing to the magnitude of the scandals and the increased public concerns over ethical reporting in American corporations , member of the Congress saw it necessary to develop legal framework that will

minimise reoccurrence of such ethical issues . The result was Sarbanes Oxley Act . Some important aspects of the act ensure that companies adhere to the most open accounting standards , and also protect individuals who report their employers when they are forced to conceal information from auditors Investigations done after the rampant accounting scandals revealed that corporations had the tendency to attract investors using cooked-up numbers . This had resulted to investors going to purchase the affected companies stocks without knowledge that they were being swindled . On the other hand , company executives ended up making millions of dollars before the eventual collapse of their companies investors were the ones left with losses that accrued accounting malpractices . Sarbanes Oxley Act (to be referred to as SOX in the ) came to change this state of affairs the act forces companies to only report factual information regarding their companies without leaving some items behind . Further companies are required to use greater transparency in their operations that is , make it easier for stakeholders to easily understand what was going on in corporations

Employees in the corporations were also accorded an oversight power they did not enjoy before SOX was enacted : they are now able to keep senior management under close eye in case they were trying to hide something from auditors or stakeholders . SOX achieves this through clauses that protect whistleblowers from being intimidated by their unethical employers . Dozens of companies have found themselves under litigation for actions that were criminalised under the act . Most companies have however done their best to avid beginning investigated under the law mainly because it leads to public embarrassment . Indeed , senior management , employees and general public tend to see companies that under SOX litigations poor managed , and that the management does not care about the well being of the company in the eyes of important stakeholders , especially shareholders who provide working capital . The three SOX litigation cases to be discussed here include the ones involving , Levi Strauss and Co , Homes ISA , Inc , and Lexmark International , Inc

Part II . Case Discussion

Levi Strauss Co

This cloth-wear company found itself being under SOX litigation after tow of its former employees , Thomas Walsh and Robert Schmidt , declared that they had been forced to hide some important information from auditors . The two executives worked in the accounting department of Levi Strauss and were getting ready to present the necessary information to KPMG that was coming-in as the new auditor for the company . For some reason the company...