Sarbanes-Oxley Act Essay Example | Topics and Well Written Essays - 500 words

Sarbanes-Oxley Act - Essay Example Examples include WorldCom and Enron companies. According to section 404(a) of the Act, it is a requirement that managements of companies assess their Internal Controls effectiveness and report on the same over financial reporting. Also, Subsection (b) of the same section, calls on independent auditors to attest to the assessments done by the managements. This is regarding Internal Controls effectiveness. The opinion of the study is that it is not too much a regulation. As stipulated by the Securities and Exchange Commissions report, the enactment of section 404 of the Sarbox Act have proven too costly. The outlays are incredibly high to companies, which has led to some attempts at their reduction while upholding effectiveness like the reforms of year 2007. (sec.gov, 2009) However, the cost of implementation is far much less than the 2001-2002 business scandals cost. These are with the inclusion of Global Crossing, Tyco, WorldCom and Enron companies, which shook the confidence of investors a great deal. (Hallberg, 2008 p390) A case at hand to support the argument that, it is not too much regulation is that of the collapsed Enron Company. This is where, in October 2001, Enron company had made public their third quarter earnings report where they purported to have realized an after tax Earnings of USD 1.01 billion. On the same date of reporting, Enron had cut down equity of shareholders by USD 1.2 billion, which it claimed to be the rectification of accounting errors. In November, 2001 the company filed with the SEC Form 8-K, considering the current events. This form 8-K stipulated that Enron would like to restate their financial statements from year 1997 through 2001 June. These statements led to a shocking fall of income of USD 569 million. In the same year, 2001, Enron Company filed for bankruptcy which triggered investigations. (De Vay, 2006 p3) As said earlier, as stipulated by the Securities and Exchange