The role of the Sarbanes Oxley act in promoting financial fraud
Added on 2020-01-21
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Since the introduction of the SarbanesOxley act has it been successful
TABLE OF CONTENTS1INTRODUCITON.........................................................................................................................3Questionnaire ..................................................................................................................................52Literature review............................................................................................................................63Research methodology.................................................................................................................10Discussion evidence and analysis..................................................................................................127Conclusion and recommendation.................................................................................................21REFERENCES..............................................................................................................................22
1INTRODUCITONBackground of lawIn past few years many cases of fraud are observed in case of large business corporations.Due to news of involvement of companies in such kind of fraudulent activities stock marketperform negatively and share price declined sharply in a single day (Brochet, 2010). Due to thisreason investors loose a huge amount of money on shares. Sometimes firm winding up afterdoing fraud and due to this reason creditors loose their money and employees loose their jobfrom the firm. In order to bring check on such kind of fraudulent activities US senate bring a lawwhich is also known as Sarbanes- Oxley act (The Sarbanes-Oxley Act, 2006). The name of thisact is determined on the basis of US senator Paul Sarbanes and US representative Miachael G.Oxley. This law has great significance for various entities because it help government and peoplein ensuring the companies are not involved in any fraud activity and they are not manipulatingtheir accounts. In this law there are about eleven parts and each sub-part contain variousprovisions related to the research topic. These sub parts contains provision related to thecorporate board responsibility, criminal penalties and requirements of securities and exchangecommission is also determined in this law. Various provisions related to the role of auditors inauditing are also encompassed in this law (Hostak and et.al., 2013). Hence, it can be said that thislaw has due importance and all measures are taken in this law in order to make sure that againsuch kind of fraud activities will not take place in the USA corporations. There are number ofstrict provisions in this law and it is assumed that Sarbanes- Oxley act is very effective incontrolling fraud activities in the organizations.Rationale of researchThis research was conducted in order to measure effectiveness of the Sarbanes- Oxleyact in curbing and controlling chances of occurrence of fraud in USA. It has been observed andfind out in published articles that previously also many laws were prepared in USA and ininternational world but even though fraud are taking place in well known organization on whichpeople believe too much in terms of their loyalty towards their work (Ahmed and et.al., 2010).There are many tight provisions in this law and at first look at previsions of this law it seems thatit will be effective in prevention of manipulation of accounts. This research was necessary toconduct in order to identify the extent to which various people believe that this law is effective.Research results will show whether people believe that since inception Sarbanes- Oxley act is
successful. Hence, it can be said that this research have a great importance for different type ofpeople.Aims and objective of researchAimTo identify the extent to which Sarbanes- Oxley act is successful since its inception.ObjectivesTo identify that there are strict provisions related to the auditor independence, corporateresponsibility and enhanced financial disclosure in the Sarbanes- Oxley act.To measure the effectiveness of studies and reports in providing valuable inputs to thecomptroller general and SEC.To measure the extent to which white collar penalty enactment is effective in curbingpractice of manipulation of accounts.To measure the effectiveness of corporate tax return and corporate fraud accountabilityprovisions of Sarbanes- Oxley act.
Questionnaire Name _________________Age _________________Gender ________________Do you know about Sarbanes- Oxley act YesNoThere are strict provisions related to auditor independence in Sarbanes- Oxley act Highly satisfiedSatisfiedNeutralDissatisfiedHighly dissatisfiedSarbanes- Oxley act make top managers responsible for fraud committed by company YesNoDo you think that determination of accountability of top managers will lead to check on fraudpractices in company's.Yes NoEnhanced financial disclosure are effective tool to control chances of fraud in organization. Highly satisfiedSatisfiedNeutralDissatisfiedHighly dissatisfiedStudies and reports produced by comptroller general and SEC are helping government in bringchanges in its policies.YesNoWhite collar penalty enactment is effective in curbing practice of manipulation of accounts.
Highly satisfiedSatisfiedNeutralDissatisfiedHighly dissatisfiedDo you think that freezing of transaction or payment is 100% effective in preventingimplementation of fraud at ground level.YesNoProvision of disclosure by security analyst about disclosure of knowable conflict of interest will100% help in bring fraud done by companies on ground level. YesNo2Literature reviewThere are eleven provisions in this law that are used to prevent fraud practices in thecompany and its accounts. According to DeFond and et.al, (2011) some of the provisions likeauditor independence, enhanced financial disclosure and corporate responsibility are theimportant part of Sarbanes- Oxley act. Auditor and financial disclosure are two main things thathelps in ensuring that final accounts of company are perfect and there is transparency incompany operations. If there will not be proper disclosure of the company accounts then allthings or transactions related to company accounts will not be in relevant schedules of the annualreport. Investors and other stakeholders will not comes to know about the areas where firm isinvolving in fraud. In this act various provisions related to the financial disclosure are availableand they are very effective. Kang, Liu and Qi, (2010) claims that financial disclosure section ofthis act describes the rule and regulations that needs to be followed for reporting financialtransactions in the company accounts and annual report. This include method of reporting oftransaction which encompassed off balance sheet transaction, format that will be followed forreporting of company accounts and schedules related to same in the firm annual report. The wayin which stock transactions will be reported in the company accounts is also determined in thisact. As per this act firms internal control system need to ensure the accuracy of financial reportand disclosures that are made in same. It is also mandatory to report any change in the financial
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