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Sarbanes-Oxley

In the time spanned from late 2001 to early 2002 significant events were happening here in the United States. Specifically, these events were ones that would impact major business as we know it. The events involved three firms which have now become infamous. The firms are Enron Corporation, WorldCom, and Andersen. What makes these three firms so infamous is there involvement in a series of corporate scandals and fraudulent accounting practices. The scandals of these firms have had drastic effects on shareholders, as we will see further, as well as preventative measures taking by the federal government. One of the largest and most notorious of regulations enacted is the Sarbanes-Oxley (SOX) act. This act is viewed by some as a blessing and others as a curse. The purpose of this paper is to understand the events leading up to the passing of SOX, as well as the effect of those events. Further, we will discuss the passing of SOX and regulations and provisions provided by SOX. One area of significance as regards the act is the provisions for whistleblowers. These provisions will be explained also. Finally, we will discuss the cost/benefits associated with SOX.
As mentioned previously, three firms contributed greatly to the need for an act such as Sarbanes-Oxley. To start off the discussion lets focus on arguably the most notorious, Enron Corporation. Out of the three firms Enron was the first to collapse due to their fraudulent practices. Enron was using tax shelters on their domestic assets as well as keeping about one third of their subsidiaries in offshore accounts. (The Real Enron, 7) This hiding of assets allowed them to avoid taxation and overstate profit. When Enron's whole scandal came to light, it was revealed that Enron had lost $618 million in the third quarter of 2001 and would reduce their net worth by $1.2 billion. It was by December 2nd of the same year that Enron filed for bankruptcy leading to their ultimate demise. (Glater, C1)...

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