Thursday, June 20, 2019
The Sarbanes-Oxley Act of 2002 Research Paper Example | Topics and Well Written Essays - 4750 words
The Sarbanes-Oxley Act of 2002 - Research Paper ExampleIt quickly became apparent to all as soon as the scandal became public that twain it and the cause behind it could have been avoided. To try to prevent other corporate scandals and collapses from happening, President George W. Bush signed into law the Sarbanes-Oxley Act, named for its sponsors, which would establish measures for corporate oversight and see to it stiff punishments for those that even attempted, knowingly or unknowingly, to engage in corporate fraud (Bumiller, 2002). Promising to hold the top echelon of corporate executives accountable, and overhauling auditing and recording practices, the Sarbanes-Oxley Act was declare to be the most far-reaching reform of the United States of America since the time of Franklin Delano Roosevelt (Bumiller, 2002). Enron From Start, to Scandal The story of what would be one of the largest scandals in history started in 1985, when Enron came into existence as Kenneth Lay combined h is company, Houston Natural Gas, with InterNorth Corporation to form Enron (National Public Radio, 2002). Hoping to gain further profits and showcase its new status as not only when a business but a competitor, Enron started to market what was known as futures contracts or the delivery of natural gas to buyers for a certain price at some point in time in the future (National Public Radio, 2002). Like a giant game of Monopoly, Enron worked the boards buying and selling, building profits trance growing the business larger and larger, expanding its business. Unfortunately, the investments and contracts that Enron had become known for by 2001 did next to nothing in terms of earning money. The investments that were made and secured largely were not turning a profit, or even earning a return (National Public Radio, 2002). Enron had invested sums of its own corporate funds in operations that, it had hoped, would provide even more money with which to fly the coop the business, thus creat ing a cycle of profit (National Public Radio, 2002). That money never materialized, though this was kept secret until Enron filed for bankruptcy. The ensuing scandal brought about major reforms in the way accounting practices and audits were conducted, starting with the Sarbanes-Oxley Act. Enron and GAAP Violations Above all, the biggest question posed to Enron was, what exactly happened? By all accounts, it appeared to be doing hygienic. Even its own employees did not leery wrongdoings within the company (Cruver, 2003). Unfortunately, Enron also violated Generally Accepted Accounting Principles (GAAP), or guidelines set out for the preparation of financial statements, in a account of ways (Cunningham & Harris, 2006). While this was not the entire reason for the collapse of the giant that left many without jobs and executives heading to jail for their actions, the ignorance and violation of GAAP principles may well have been the starting point.