BUS591: Financial Accounting & Analysis Week 4 - Discussion 2
Search the Internet and locate an annual financial report for a public U.S. company. Read
the Notes to the Financial Statements to determine the criteria for cash equivalents and
how cash and cash equivalents are handled. Discuss your findings. Find information about
the internal control policy of the company and summarize this policy in your post. Is it in
compliance with SOX? What are some references to SOX mentioned in the annual report?
Your answer should demonstrate understanding of the Sarbanes-Oxley Act, and be a
minimum of 100 to 200 words in length. Respond to at least two of your classmates’ posts.
Sarbanes –Oxley act of 2002 was in –acted because of Wall Street scandals. It is a controversial
federal law design to reverse the declining public trust in accounting and reporting by major
public entities. This law is broad in attempts to establish new standards for public trading
company’s management and accounting firms that oversee practices. Part of this act includes the
establishment of the public company account oversight board their job is to audit the auditors.
This act also requires a certification of financial reports by a fiduciary position within the
company. This inserts a stamp of approval by those in charge of the company. Lastly, this act
enhances criminal and civil penalties for violations of securities laws. Those who are convicted
of wrong doing will face harsher repercussions by the government.
The expenses related to implementing SOX have been high because of the significant burden
faced by public companies the necessity of the law has been in question. Cost falls as the
companies familiarize themselves with the internal workings of the act. In recent studies a
decrease in listed public companies has risen it has become easier and more cost effective for
companies to move to a foreign exchange with fewer laws than the United States. The related
cost for the SOX directly transfer to the investing public this bill was influenced by the activities
of Enron ,Tyco International and World Com just to name a few . These scandals have costs
billions to investors. For example Enron Corporation was an American energy commodity
services company out of Houston, Texas. Before they went bankrupt on December 2 of 2001
Enron has 20,000 employees and they were one for the world’s leading electric , natural gas ,
communications pulp and paper companies . In 2001 it was reported that Enron financial
condition was a creatively planned accounting scandal. This has made Enron a very widely
known symbol for corporate fraud and corruption.
References
Kimmel, P.D., Weygandt, J.J., & Kieso, D.E. (2011). Financial accounting: Tools for business
decision making (6th ed.). I
http://www.accounting today.com/channels/Sarbanes-Oxley