Applied Business 8-1 - Essay Example

Applied Business 8 of Applied Business 8 As we go through the SOX (Sarbanes-Oxley) Act of 2002, which set new improved standards for public accounting firms, public company management and boards (Miller, Hollowell, & Miller, 2008, p. 17-18). Under SOX the corporate directors and the officers may be liable for their actions for wrong doing in this case. SOX was passed by the US Congress in the wake of numerous of corporate scandals. Similarity in most of these scandals was distorted reporting of preferred financial transactions.

Companies such as Tyco, WorldCom and Enron covered up or manipulated a variety of doubtful transactions, which result in heavy losses to shareholders and raised crisis in investor confidence. SOX aims to Act improved corporate control and gave strength to corporate accountability. It applies that by: Legalizing and strengthening the internal checks and balances inside public corporations establishing a variety of levels of control to guarantee that financial reporting practices revealing corporate governance is managed with full transparency.

The SOX Act introduced new penalties for acts of wrong doing and standards for corporate liability as well. It changes how corporate boards and executives must communicate with each other and with corporate auditors. Investigation found that law eradicates the cover of "financial issues were not in my knowledge" from directors and management, holds them answerable for the accuracy of financial statements. As law specifies financial reporting obligations, including attachment to new controls and processes designed to assure the legality of their financial records.

Directors and Officers should be personally kept responsible for violating the law and showed negligence in investment.ReferencesMiller, R. L., Hollowell, W. E., & Miller, R. L. (2008). Business law: Text & exercises. Mason, Ohio: Thomson/West.