Sarbanes-Oxley Act Of 2002

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Sarbanes-Oxley Act of 2002
Research Paper

Imagine over $60 billion of shareholder value, almost $2.1 billion in pension plans, and initially 5,600 jobs - disappeared (Associated Press, 2006). One would have to wonder how that is possible. These are the consequences the investors and employees of Enron Corporation endured after the Enron scandal started to unravel. This paper will focus on the infamous accounting scandal of Enron Corporation. It will also discuss how the company was able to fool investors by producing misleading financial statements, why they were not caught sooner, and new regulations enacted in response to the scandal. Enron Corporation was a leading American energy company located in Houston, Texas. The
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Eventually, an investigation by the SEC was initiated to review Enron’s accounting procedures and their partnerships. Shortly after the investigation, Enron officials admitted to overstating the company earnings for multiple years. Today, Enron no longer exists and Arthur Anderson is no longer performing audits. The monetary damages suffered by investors, employees, and other companies in the Enron scandal are monstrous. With so much doubt lurking over investors, the government needed to react. After the public was made aware of the Enron scandal, and other recent scandals such as WorldCom and Tyco, a flood of proposals and legislation were produced by Congress and the Security and Exchanges Commission (SEC) about how to deal with the situation. Of the changes brought about, the Sarbanes-Oxley Act was by far the largest. The Sarbanes-Oxley Act of 2002 is named after its sponsors, Senator Paul Sarbanes and Representative Michael Oxley (The Sarbanes-Oxley Act). The act is administered by the SEC, and is legislation that was enacted to help protect investors and the general public from accounting errors and fraudulent practices. The SEC sets the deadlines for company compliance along with the rules on its requirements. The Sarbanes-Oxley act changed how executives and corporate boards interact with each other and corporate auditors, it ensures that top company executives such as CEOs and CFOs are held