Sarbanes-Oxley Act of 2002 has been described as the most far-reaching legislation affecting business since the passage of the 1933 Securities Act.
There is one part of this process that is beginning to have a positive effect on the companies under SEC jurisdiction. The events of the last 5 years have made it clear to all areas of a company that there is a right way to do accounting and if you do not do it right then the company is in trouble. This has caused many who before considered accounting a necessary evil. One that took a lot of time away from operating the company. There was a company marketing manager who once thought it did not matter as long as revenue and expense got recorded in just any account. To his credit all expense and revenue was recorded--some in the wrong year--some as capital expense when it was operating expense. He/she figured that any recordings that were in the wrong account someone in accounting would find them and change to the right account. Also, if it got by the accountant then the auditors would find it and suggest the company make correcting entries. And it the auditors did not catch the items then who would care. Along came the events of the late 90's and early 2000's and it made her/him realize the real importance of doing it right and making sure it was reported correctly.
From what I can tell there has been a substantial increase in the awareness of the importance of doing proper accounting in all departments of companies under SEC jurisdiction. Do any of you have examples that back up this theory?
The penalties for breaching SOX rules are extremely severe: fines of up to $5,000,000 and 20 years' imprisonment. Executive officers are held directly responsible for internal controls. Some examples include:
McAfee has been fined $50 million for its accounting manipulations in fiscal 2000 which resulted in a $120 million shortfall and lawsuits over its revenue recognition policy. The SEC had charged McAfee with securities fraud for allegedly inflating cumulative net revenue by $622 million during the period between 1998 and 2000. In 1998 ...
Answer provides the implications of the act on companies and the penalties for violations