Ethical Behavior

Ethical Behavior

12/7/2014

ACC 291

        Because of the accounting scandals of major corporations such as Enron and WorldCom, the Sarbanes-Oxley Act of 2002 was enacted. This act mandates a stricter code of conduct regarding financial practices, accounting controls , and corporate governance. It also calls for the enforcement of tougher criminal penalties for violaters. There are 11 sections to the Sarbanes-Oxley Act and also several compliance subsections. Lawmakers will expect SOX to enhance the corporate controls of public corporations and that it will prevent accounting fraud. SOX created a total revision to the framework to public accounting and auditing profession while providing guidance as well. SOX is widely credited with enforcing CEO and CFO responsibility and accountability for all financial disclosures and related controls. Section 404 remains one of the most controversial aspects of the SOX Act. This section requires the management of the company to provide assertions of the effective internal controls over the financial reports. It also requires the company’s independent auditors to assert the same. Before SOX, auditors to assert the same. Before SOX, auditors have functioned  as a self –regulated profession. Important decisions regulated the profession were made almost exclusively by the industry, their firms, and the auditors themselves. The effectiveness of the SOX Act will depend largely of the vigor in which it is enforced. There are still questions about whether the SEC and Department of Justice enforcement of the SOX Act has been sufficient. The biggest threat, that of jail time for corporate executives that knowingly certify inaccurate financial reports, is largely not being used. Although SOX has been widely successful, there is still a lot of room for improvement in audit performance and is why I believe that it has not made a difference. That had been expected. The significance of a strong ethical culture to an organizations success is and always will be the subject of many articles and debates. An ethical workplace makes it easier to attract the most qualified employees  and will minimize costs of minimize the cost of employee turnover resulting in even more productivity and profitability (Zhang, 2007).