Sarbanes-Oxley Act and HealthSouth

Essay by na101 October 2007

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IntroductionThe amount of frauds that occur in and around health departments or any other organizations has been a growing topic of conversation over the last decade in our society. Employers and employees alike have been committing frauds on far more frequent basis over the last few years and in the minds of some, this is an issue that is getting or has gotten out of hand, as one can see in Health South issue. Therefore, in recent years, accounting scandals have caught public attention and forced companies to examine their ethical practices in this area. One of the great examples of today is Richard Scrushy, CEO of HealthSouth, who was accused of account fraud, giving false impressions of the company's financial status to meet the Wall Street's expectations. Thus, Sarbanes-Oxley act was enacted in response to HealthSouth and several other recent episodes including abuse of power, corporate fraud, and mismanagement.

This law was also enacted to strengthen Corporate governance and to restore lost faith by the investors, and to protect investors by improving the accuracy and reliability of corporate disclosures. The main purpose of this paper is how the different sections of Sarbanes-Oxley Act would improve on the ethical issue affecting companies today.

The History of SOXThe Sarbanes-Oxley Act or SOX is also known as the Public Company Accounting Reform and Investor Protection Act of 2002. SOX was established in April of 2002 by two gentlemen at different times. The first proposal was submitted by Representative Michael G. Oxley a Republican from Ohio followed by a second proposal by Senator Paul Sarbanes a Democrat from Maryland. After the second submission, the House of Representatives reconciled the two proposals and made it into one act. The Act was put together mainly due to the sudden financial scandals committed by corporate...