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Reply to Justin————-I graduated high school in 2001 during the years of the bear, the bear market that is. I vaguely remember hearing about all the scandals going on with Enron, WorldCom and even Martha Stewart. However, at the time I did not understand the impact it was having on the market and ultimately the entire economy. Prior to the introduction of the Sarbanes-Oxley Act of 2002 it seemed the generally accepted accounting principles displayed by wall street resembled something out of the wild west.  Congressional investigators were looking into ImClone System’s failed application for the cancer drug Erbitux. The same Erbitux misfortune that granted Martha Stewart her street cred after being sentenced to prison for the insider trading.
Truthfully, I do not think that Martha’s preemptive sale of her stocks based of a tip from a friend is nearly as corrupt as Bernard Ebbers’ borrowing hundreds of millions of dollars in personal loans from the company. Ebbers was the CEO of WorldCom, and he was worth billions. WorldCom was the largest telecommunications company on the planet at the time. However, unlike Enron and some of the other major scandals of that time, WorldCom was committing a series of amateur accounting violations. But with a company as large as WorldCom the small violations quickly added up to very large figures. Basically they capitalized the line costs on the balance sheet instead of recording them as expenses on the income statement. This inflated their net income fooling investors into thinking the company was healthier than it was. Long distance line costs typically account for the largest expense for telecom companies. What’s worse is their accounting firm, Arthur Andersen, was just as corrupt as they were. Andersen was one of the biggest accounting firms at the time. They were supposed to be the unbiased third party who verified the books ensuring the companies were complying with the Generally Accepted Accounting Principles. Obviously, since it should have been apparent that WorldCom was writing their largest expense off into prepaid accounts in an attempt to avoid depreciation, it meant Arthur Andersen was guilty as well. And if signing off on WorldCom’s books wasn’t enough, their conviction of obstructing justice by destroying Enron documents would surely lead to the accounting giant being all but driven out of business.
While the Sarbanes-Oxley Act may require considerable resources from a company to ensure its compliance, it is still good practice for any company. This act only requires companies to certify that what they tell their investors is in fact true. This means that the companies with strong internal controls become stronger, and the companies that are found to have poor controls are forced to tighten up their accounting procedures. Transparency and affirmation that the numbers are accurately representing the standing of the company is just good practice and a good place to be for any company. 
Griff, Miracel (2014, LuLu Press) Professional Accounting Essays and Assignments. Retrieved April 18, 2018——————————— Reply to DeWayne———–Good Day Class,
Sarbanes-Oxley, or SOX, is a federal law that is a comprehensive reform of business practices. The  2002 Sarbanes-Oxley Act aims particularly at public accounting firms that participate in audits of corporations and was passed in response to a number of corporate accounting scandals that occurred between 2000-2002. This act set new standards for public accounting firms, corporate management, and corporate boards of directors.
The Enron scandal was certainly enough to show the American public and its representatives in Congress that new compliance standards for public accounting and auditing were needed. Several years before the Enron bankruptcy, the government had deregulated the oil and gas industry to allow more competition, but this also made it easier to cheat. Enron, among other companies, took advantage of this deregulation. The various misdeeds and crimes committed by Enron were extensive and ongoing. In order to facilitate fraud of such magnitude internally; evidence suggests that internal controls were diminishing the material quality of all financial reports released by Enron in the year 2000. Due to the lack of external regulatory oversight Enron’s auditors and  Mr. Anderson understood the ease associated with being able to “cook the books” with from the inside little or no resistance. He was the sole auditor for the company and just by overlooking or altering financial statements Mr. Anderson was able to retain his power and status with the firm ensuring the generous payout of 50 million dollars.
In response to what was widely seen as collusion by Enron’s accountants, The Arthur Andersen firm, in Enron’s fraudulent behavior, SOX also changes the way corporate boards deal with their financial auditors. All companies, according to SOX, must provide a year-end, report about the internal controls they have in place and the effectiveness of those internal controls.

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