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Running Head: SARBANES OXLEY ACT
Sarbanes Oxley Act
SARBANES OXLEY ACT
Before the development of Sarbanes Oxley Act by Congress, the United States
companies were not concerned about the law and the way audit was to be done. Most of the
companies floated the accounting principles and went beyond to act in manners that were
unethical. The public held corporations would condone fraud rent activities as well as lack
proper internal financial controls making it hard to work to sustain the operations of such
companies. Their financial reporting and audit procedures lacked specific guidelines even during
conducting external audits. The development of the Sarbanes Oxley Act, therefore, aims at
handling such cases. It was a result to the need to respond to accounting scandals that hit the
public corporations in 2000 up to 2002. The two major scandals that prompted the Congress to
pass this law are the Enron and WorldCom.
Lack of internal controls and lack of proper and effective organizational structure can
explain the organization failure. WorldCom and Enron are such cases of the organization whose
organizations behavior clearly explained and predicted its failure. The leadership and
management, as well as the organization structure in the company, were evident enough to alarm
a looming situation that would severely affect the firm. The behaviors demonstrated were a show
of fraud and culture of corruption were tools that cultivat...
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