Sarbanes-Oxley Act Article Analysis

Monday, October 28, 2013

Sarbanes-Oxley Act Article Analysis
In 2002 the Securities and Exchange Commission (SEC) administered the Sarbanes-Oxley Act (SOX). This legislation was a response to financial scandals involving Enron and WorldCom. Enacted to protect shareholders and the general public, this law will help to stop accounting errors and fraudulent activities. The SEC publishes rules on the requirements of SOX and posts deadlines for compliance. This paper will describe how SOX affects internal controls of a company. It will also describe auditing around the computer and through the computer.
Section 404 of the Sarbanes-Oxley Act of 2002 requires public companies to analyze the effectiveness of their internal controls for financial reporting concerns. The person or company assigned to audit a publicly held company must attest to and report the results of the analysis. Peregrine Financial Group is a company that has failed because of a lack of proper internal controls. This company is a futures brokerage firm in Cedar Rapids, Iowa. The accounting firm of Veraja-Snelling was employed to audit the company. This accounting firm functioned out of a home in Chicago and was not subject to inspections before 2010. Every year the accounting firm would confirm the accuracy of the financial statements.   The Chief Executive officer of Peregrine, Russell Wasendorf Sr. lived well in Cedar Rapids. He enjoyed using the corporate jet, living in his mansion and swimming in his swimming pool. These things were funded by the $100 million he was able to steal from his customers over a 20-year period. Mr. Wasendorf accomplished this by faking bank statements and lying to regulators. He was sentenced to 50 years in prison and has to pay $215.5 million in restitution. Separation of duties was not in place in this company and Mr. Wasendorf was able to get away with handling all of the financial information.   There was nothing...