Sarbanes Oxley Rulemaking and Reports Capstone Project

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Sarabanes-Oxley Act

Standard to most businesses is the idea that it is management's only responsibility in an organization to generate profits -- the best possible fiscal return for stakeholders. This template argues that the fiscal responsibility of the business is paramount, but that managers may not be the right level to handle a morally suspect global project. Additionally, focusing too farm on moral issues and too little on profit (Savage and McEltory, 2005). The entire purpose of doing business is to allow the organization to grow and evolve. Business would not flourish if there were no profitable advantages for both workers and the organization. A contrary view is called the "socio-economic" view of foreign trade. This view argues that organizations, who wish to compete and make a profit, must be amenable to societal changes. Simply looking at profit does not tell the entire story and is a rather myopic view for a company, especially one investing a great deal of money relocate.

Because of globalism, though, modern companies, especially those concerned with environmentalism, have had to think about global ramifications -- not just in the way they do business, but in the way they source materials, market, and even distribute products (Mayfield, 2003). These principles, and other stimuli, allowed a company (Enron) and an accounting firm (Anderson), to defraud the public, their shareholders, many of their employees by using fictional numbers to bolster their financial statements. This became a domino nightmare when the web of deceit was finally uncovered.

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By 2001, both companies filed for bankruptcy protection, Enron emerging with considerably less in terms of assets and employees, Andersen closing completely. The idea of the "Enron" scandal has become, in American popular culture, a symbol of corporate greed and dishonesty in accounting (Bryce, 2002; McLean, et.al., 2003).

As a direct result of the ENRON scandal, the United States government began to pressure organizations to accept more government oversight in the guise of external governance. External governance is a set of customs, laws, policies, and institutions that affect the way a company is administered and controlled. Essentially, it was put in place to ensure a higher level of accountability within an organization. In effect, one school of thought holds that external governance protects shareholders and the public from unscrupulous practices, something, for instance, that the recent ENRON scandal showed to be of limited value. This, in fact, resulted in the 2002 passing of the Sarbanes-Oxley Act, which intended to restore public belief in corporate governance (Bumiller, 2002).

A basic principal in accounting is called CAPP, or "generally accepted accounting principles." This has international meaning, and were designed to ensure licensing and standards of all accountings so that there would be transparency and ethical belief in company numbers. This is not limited to reporting data, but also to its source. Because of Enron, though, the government did not believe GAPP was sufficient to ensure the level of ethical behavior needed. This resulted in the Sarbanes-Oxley Act. The 2002 Sarbanes-Oxley law.....

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