do you think the costs associated with implementing the Sarbanes-Oxley Act are worth the trouble? - 12257

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  • Posted on: Sat 07 Jul, 2012
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1.    Sarbanes Oxley Act was implemented for both CEO's and audit firms. On top of making sure they are punished, it was also implemented to prevent upper management from stating that they had no idea what was going on in the company financially. A lot of those top execs in Enron & WorldCom scandals attempted to shuffle the knowledge of unethical behavior on all of those in lower positions stating that they were never informed or misinformed. Since transparency is the key do you think the costs associated with implementing the Sarbanes-Oxley Act are worth the trouble?

 




2.    Looking at segregation of duties and the lines of approval, let's look at this particular situation...My mother worked for a pharmaceutical company and they stopped having corporate conferences in Las Vegas because people were using their corporate credit cards to gamble and then tried to turn around and write off additional expenses to cover the "charges" on the card. There were several employees fired and the company decided, at that time, to choose not to go to that location for years. Thinking about this particular area of your company, what are some fail safes that can be put into place to monitor expense reports and/or company credit cards?

 

 

 

3.    While SOX is expensive it has had a good impact on the accounting community and also some negatives. We know the advantages are for SOX what are the disadvantages?

 

4.     Liabilities are an integral part of the business. When looking at your own organization or one that you have researched, what would be your organization's largest liability and how does that affect your organization's financial statements? 

 

 

5.    Within the liabilities section you find Stockholder's equity. Why, if shareholders invest in an organization, are they listed under liabilities rather than as assets?

 

 

6.    Consumer deposits...otherwise known as Unearned Revenue. When looking at payments made before work is completed you can look in the accounting records for an account called Unearned Revenue. What is unearned revenue? Name several types of unearned revenue and tell me why it is considered a liability? 

 

 

Solution Description

1.    Sarbanes Oxley Act was implemented for both CEO's and audit firms. On top of making sure they are punished, it was also implemented to prevent upper management from stating that they had no idea what was going on in the company financially. A lot of those top execs in Enron & WorldCom scandals attempted to shuffle the knowledge of unethical behavior on all of those in lower positions stating that they were never informed or misinformed. Since transparency is the key do you think the costs associated with implementing the Sarbanes-Oxley Act are worth the trouble?

The reason that Sarbanes-Oxley Act was enacted was to protect the investors by ensuring transparent reporting.  The act makes CEO’s and CFO’s more responsible and they cannot blame others. The act allocates financial responsibilities and requires all financial reports to include a report for internal controls. This is something that may prove costly for a company and the cost may outweigh the benefits, but I think that it is worth implementing where huge public companies are concerned with large investments. When huge amounts of money is at stake the cost of implementing such controls does not outweigh the benefits and is justified.( http://www.sox-online.com/basics.html)