Sarbanes Oxley Act Of 2002 - 1635 Words

In order to prevent the happening of such disaster, the USA congress enact a new regulation named Sarbanes-Oxley Act of 2002 , also called â€Å"Public Company Accounting Reform and investor Protection Act† The main purpose of the act is to protect shareholders and general public from accounting errors and fraudulent practices in the enterprise, as well as improve the accuracy of corporate disclosures. (Mike Oxley 2002). Sarbanes-Oxley Act of 2002 is deemed to be one of the most virtual governance reforms and corporate disclosure in the United States history. This act made it possible to quantity the responsibilities of company’s management. Pursuing personal interests is nature calling and nobody can predict the future accurately, which†¦show more content†¦2.2 PCAOB In some particular case, the accounting standards exactly are the problems. The legislation fixed it though asking those special institution, such as the Securities and commission and the Financial Accounting Standards Board, to tighten the accounting standards. For instants, the â€Å"special purpose entities†, that is a institution created by non-profit company , used to treat some particular risk facing by the company during their operating. Nevertheless, in Enron’s case, such institution seems just like useless decorations for their fraud. As required in Sarbanes-Oxley, the capital of Financial Accounting Standard Board should come from itself or public companies. Have no benefit-based relationship with accountants. It ensure that the membership of Financial Accounting Standard Board was independent from accounting operation. The rise in accounting restatements and earnings manipulation suggested that the deeper issue was not with the accounting standards themselves , but rather with the enforcement of those standards through auditing (Bratton, 2003). The Sarbanes-Oxley created a new institution in the first section named Public Company Accounting Oversight Board(PCAOB). During those years before the create of PCAOB, there were some independent agency and private regulatory institution, such as SEC and American Institute of Certified Public Accountants. A common problem of those institution was that the quality of audits was cheap. For