Sarbanes- Oxley Act 2002

For this time,i would like to touch on Governance and responsibility,for that..bELow explains the Sarbanes-Oxley Act as example of a rule based approach to corporate governance. This topics includes in the Study guide part (A) 6(e).This is concern on the US part which is similiar to Cadbury's Combine Code in UK.

The Sarbanes-Oxley Act of 2002, sponsored by US Senator Paul Sarbanes and US Representative Michael Oxley, represents the biggest change to federal securities laws in a long time. It came as a result of the large corporate financial scandals involving Enron, WorldCom, Global Crossing and Arthur Andersen. Effective in 2006, all publicly-traded companies are required to submit an annual report of the effectiveness of their internal accounting controls to the SEC.Provisions of the Sarbanes Oxley Act (SOX) detail criminal and civil penalties for noncompliance, certification of internal auditing, and increased financial disclosure. It affects public U.S. companies and non-U.S. companies with a U.S. presence. SOX is all about corporate governance and financial disclosure.

Question may arise What is the Sarbanes-Oxley Act comprised of?
The Sarbanes-Oxley Act itself is organized into eleven sections, but sections 302, 404, 401, 409, 802 and 906 are the most important in terms of compliance. Section 404 seems to cause the most difficulties for compliance. More specifically, Sarbanes-Oxley established new accountability standards for corporate boards and auditors, established a Public Company Accounting Oversight Board (PCAOB) under the Security and Exchange Commission (SEC), and specified civil and criminal penalties for noncompliance.
Second,What does Sarbanes-Oxley compliance require?
All applicable companies must establish a financial accounting framework that can generate financial reports that are readily verifiable with traceable source data. This source data must remain intact and cannot undergo undocumented revisions. In addition, any revisions to financial or accounting software must be fully documented as to what was changed, why, by whom and when.
Third,What are the penalties for noncompliance with Sarbanes-Oxley?
Besides lawsuits and negative publicity, a corporate officer who does not comply or submits an inaccurate certification is subject to a fine up to $1 million and ten years in prison, even if done mistakenly. If a wrong certification was submitted purposely, the fine can be up to $5 million and twenty years in prison.

Summary of SOX:
Thousands of companies face the task of ensuring their accounting operations are in compliance with the Sarbanes Oxley Act. Auditing departments typically first have a comprehensive external audit by a Sarbanes-Oxley compliance specialist performed to identify areas of risk. Next, specialized software is installed that provides the "electronic paper trails" necessary to ensure Sarbanes-Oxley compliance.

The summary highlights of the most important Sarbanes-Oxley sections for compliance are listed below. Note that certification and specific public actions are now required by companies to remain in SOX compliance.

nOw on to the section:

1) SOX Section 302 - Corporate Responsibility for Financial Reports
a) CEO and CFO must review all financial reports.
b) Financial report does not contain any misrepresentations.
c) Information in the financial report is "fairly presented".
d) CEO and CFO are responsible for the internal accounting controls.
e) CEO and CFO must report any deficiencies in internal accounting controls, or any fraud involving the management of the audit committee.
f) CEO and CFO must indicate any material changes in internal accounting controls.

2) SOX Section 404: Management Assessment of Internal Controls
All annual financial reports must include an Internal Control Report stating that management is responsible for an "adequate" internal control structure, and an assessment by management of the effectiveness of the control structure. Any shortcomings in these controls must also be reported. In addition, registered external auditors must attest to the accuracy of the company management’s assertion that internal accounting controls are in place, operational and effective.

3) SOX Section 902 - Attempts & Conspiracies to Commit Fraud Offenses
It is a crime for any person to corruptly alter, destroy, mutilate, or conceal any document with the intent to impair the object's integrity or availability for use in an official proceeding.

For the entire report in PDF format, see Sarbanes-Oxley Act of 2002 Report.
the full SOX:

TITLE I — PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD
Sec. 101. Establishment; administrative provisions.
Sec. 102. Registration with the Board.
Sec. 103. Auditing, quality control, and independence standards and rules.
Sec. 104. Inspections of registered public accounting firms.
Sec. 105. Investigations and disciplinary proceedings.
Sec. 106. Foreign public accounting firms.
Sec. 107. Commission oversight of the Board.
Sec. 108. Accounting standards.
Sec. 109. Funding.

TITLE II — AUDITOR INDEPENDENCE
Sec. 201. Services outside the scope of practice of auditors.
Sec. 202. Preapproval requirements.
Sec. 203. Audit partner rotation.
Sec. 204. Auditor reports to audit committees.
Sec. 205. Conforming amendments.
Sec. 206. Conflicts of interest.
Sec. 207. Study of mandatory rotation of registered public accounting firms.
Sec. 208. Commission authority.
Sec. 209. Considerations by appropriate State regulatory authorities.

TITLE III — CORPORATE RESPONSIBILITY
Sec. 301. Public company audit committees.
Sec. 302. Corporate responsibility for financial reports.
Sec. 303. Improper influence on conduct of audits.
Sec. 304. Forfeiture of certain bonuses and profits.
Sec. 305. Officer and director bars and penalties.
Sec. 306. Insider trades during pension fund blackout periods.
Sec. 307. Rules of professional responsibility for attorneys.
Sec. 308. Fair funds for investors.

TITLE IV — ENHANCED FINANCIAL DISCLOSURES
Sec. 401. Disclosures in periodic reports.
Sec. 402. Enhanced conflict of interest provisions.
Sec. 403. Disclosures of transactions involving management and principal stockholders.
Sec. 404. Management assessment of internal controls.
Sec. 405. Exemption.
Sec. 406. Code of ethics for senior financial officers.
Sec. 407. Disclosure of audit committee financial expert.
Sec. 408. Enhanced review of periodic disclosures by issuers.
Sec. 409. Real time issuer disclosures.

TITLE V — ANALYST CONFLICTS OF INTEREST
Sec. 501. Treatment of securities analysts by registered securities associations and national securities exchanges.

TITLE VI — COMMISSION RESOURCES AND AUTHORITY
Sec. 601. Authorization of appropriations.
Sec. 602. Appearance and practice before the Commission.
Sec. 603. Federal court authority to impose penny stock bars.
Sec. 604. Qualifications of associated persons of brokers and dealers.

TITLE VII — STUDIES AND REPORTS
Sec. 701. GAO study and report regarding consolidation of public accounting firms.
Sec. 702. Commission study and report regarding credit rating agencies.
Sec. 703. Study and report on violators and violations
Sec. 704. Study of enforcement actions.
Sec. 705. Study of investment banks.

TITLE VIII — CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY
Sec. 801. Short title.
Sec. 802. Criminal penalties for altering documents.
Sec. 803. Debts nondischargeable if incurred in violation of securities fraud laws.
Sec. 804. Statute of limitations for securities fraud.
Sec. 805. Review of Federal Sentencing Guidelines for obstruction of justice and extensive criminal fraud.
Sec. 806. Protection for employees of publicly traded companies who provide evidence of fraud.
Sec. 807. Criminal penalties for defrauding shareholders of publicly traded companies.

TITLE IX — WHITE-COLLAR CRIME PENALTY ENHANCEMENTS
Sec. 901. Short title.
Sec. 902. Attempts and conspiracies to commit criminal fraud offenses.
Sec. 903. Criminal penalties for mail and wire fraud.
Sec. 904. Criminal penalties for violations of the Employee Retirement Income Security Act of 1974.
Sec. 905. Amendment to sentencing guidelines relating to certain white-collar offenses.
Sec. 906. Corporate responsibility for financial reports.

TITLE X — CORPORATE TAX RETURNS
Sec. 1001. Sense of the Senate regarding the signing of corporate tax returns by chief executive officers.

TITLE XI — CORPORATE FRAUD AND ACCOUNTABILITY
Sec. 1101. Short title.
Sec. 1102. Tampering with a record or otherwise impeding an official proceeding.
Sec. 1103. Temporary freeze authority for the Securities and Exchange Commission.
Sec. 1104. Amendment to the Federal Sentencing Guidelines.
Sec. 1105. Authority of the Commission to prohibit persons from serving as officers or directors.
Sec. 1106. Increased criminal penalties under Securities Exchange Act of 1934.
Sec. 1107. Retaliation against informants.

Information on this site is for educational purposes only and is not intended to substitute for, or replace information or advice given by a licensed professional, manufacturer or distributor representative, consultant or other qualified product or service information source. tQ TO SOX Copyright © 2006 tQ To Info Guide to the Sarbanes-Oxley Act of 2002

sOME OF THE recommended books are: student guide to SOX.

Ethics on Deontological and Teleological.

This Topics taken from the syllabus guide on part E which is under the Professional values and ethics.Let me start off with the area on sub-part C which focuses on describing and distinguish between deontological and teleological/consequentialist approaches to ethics.

a) Deontological ethics.
- maintain that the moral rightness or wrongness of an action depends on its intrinsic qualities, and on the nature of its consequences. Deontological ethics typically is thought to involve two important elements: prerogatives and constraints.
Prerogatives deny that agents must always seek to perform actions with optimum consequences. Constraints place limits on what actions agents may undertake in an effort to bring about their own or the impartial good.

Deontological ethics holds that at least some acts are morally wrong in themselves [e.g., lying, breaking a promise, punishing the innocent, murder (which is bad ;p) ]. It often finds expression in slogans such as “Duty for duty's sake.” Deontological theories are often formulated in such a way that the rightness of an action consists in its conformity to a moral rule or command, such as “Do not bear false witness.”
According to Immanuel Kant which is the most influential philosophers in the history of Western philosophy, says that the sole feature that gives an action moral worth is not the outcome that is achieved by the action, but the motive that is behind the action.

A deontologist might argue that, nonetheless, your duty is to ensure that you do not lie. A theory which regarded the prohibition of lying as agent-neutral, however, would object that surely if one lie is bad, twenty would be much worse. Since you could minimize overall badness by allowing one lie, you ought to lie regardless of the fact that it is you who are lying.
Of the five formulations of the categorical imperative Kant developed, the two most well-known are

• Always act in such a way that you can also will that the maxim of your action should become a universal law.

• Act so that you treat humanity, both in your own person and in that of another, always as an end and never merely as a means but always at the same time as and end.

• Act as though you were through your maxims a law-making member of a kingdom of ends.

Some other theorists include by John Locke and John Rawls. Locke held that individual persons have rights that are part of the natural law of the world, and that actions (including the death penalty, which he advocated) can be judged as right or wrong based on whether they respect these rights. John Rawls held that individual persons have a duty to act according to the laws that they would propose if they were unaware of their present socioeconomic status.

b) Teleological/consequentialist.
-The word "teleology" is derived from the Greek word "tells" that means "ends".Actions are judged to be morally good if they achieve a good goal or outcome. Teleological ethics are utilitarian in that they seek to arrive at ethical decisions on the basis of a projected outcome that would bring about the most good for the greatest number of people. "…an act is right if and only if it or the rule under which it falls produces, will probably produce, or is intended to produce at least as a great a balance of good over evil as any available alternative" The teleological approach abandons any claim to moral certainty. An example of teleological ethics is John Stuart Mill an influential liberal thinker.- In a teleological ethic, morally good decisions are means of achieving happiness. So moral goods are instruments to achieve nonmoral goods.

Dewey (1859-1952) is essentially a teleological ethicist, but he introduces much more flexibility into the traditional teleological concepts of means and ends. In doing so, he reveals some of the complications that in my view make impossible any hedonistic calculus.
Dewey accepts the basic utilitarian model of ethics: choosing a goal and then the means to achieve it. But he rejects the idea that the goal is something fixed: pleasure or happiness. Dewey insists that pleasure is only one of many goals we seek, including health, wealth, power, learning, justice, entertainment, friendship. Further, our goals change from time to time. As our goals change, of course the means also change.

- With ever-changing goals and ever-changing means leading to a flux of incompatible impulses that somehow leads to action (perhaps an axe murder ???), it is impossible to imagine what an ethical discussion could ever be about. Dewey is right to say that in fact our goals change and that with no revelation to guide us we cannot define happiness or pleasure as an absolute the way utilitarianism does. But if he is right, his point serves as a deconstruction of teleological ethics and leaves little distance between teleological ethics and existential ethics.

Teleological theories are very much like consequentialist theories (indeed, consequentialist theories are often referred to as teleological). They are similar in that in both it is some notion of the good that is centrally important, and other ethical notions derive their meaning and/or importance from the good.
There are two main differences that distinguish a teleological theory, however. The good in a teleological theory is almost always a good of some stable feature human character, i.e., a virtue. What is important in a teleological theory is not how the world is, but what sort of person and what sort of life is most valuable.
-The second main difference with consequentialism is that the point of a teleological theory is not to produce imperatives. There is no theory of right in a teleological theory; an ethical life is not understood as one in which one fulfills one’s obligations and does not violate any constraints, but in terms of a genuinely fulfilled life. A teleological theory is aattttrraaccttiivvee rather than imperative: it provides an account of what virtues, wants, desires, and satisfactions there are in a genuinely fulfilled life. Leading an ethical life is thus the person’s own self-interest, properly understood. To be sure there will be certain actions that one ought to perform in an appropriately valuable life, but they are of secondary or derivative importance.

The Difference between Deontological and teleological are :
1) Deontological theories deal mainly with the inherent righteousness of a behavior. Teleological theories stress the amount of good or bad embodied in the consequence of the behaviors. [Hunt and Vitell, 1988].

2) The deontology school of thought focuses on the preservation of individual rights and on the intentions associated with a particular behavior rather than on consequences. [Ferrell and Fraedrich, 1991]. Deontological views include the Golden Rule, "Act in the way you would expect others to act toward you" and also Kant's categorical imperative, 'Act in such a way that the action taken under the circumstances could be a universal law or rule of behavior."Deontologists feel that individuals have certain undeniable rights which include: freedom of conscience, freedom of consent, freedom of privacy, freedom of speech and due process. [Ferrell and Fraedrich, 1991].

Teleology focuses on the consequences of the actions or behaviors of the individual. [Singhapakdi and Vitell, 1991] Moral philosophers often look at teleology as consequentialism because they assess the moral worth of a behavior by looking at its consequences. To define teleology in the business sense, egoism is used. Egoists believe they should make decisions that maximize their own self-interest, which is defined differently by each individual. According to each individual egoist, self-interest can be defined in many ways, one may want pleasure, wealth, power, fame, a good physical well-being or something else. Existing weaknesses of ethical egoism prevent one from taking a stand against even blatant business practices or resolving conflicts of egoistic interests among two individuals.

This Articles are some of the information that you required to have knowledge on, however,not all of the above words,paragraph you should know..At least you have the idea,and meaning of it, then,the rest in just understanding of the question in the exam.For me,i could not memorised bits by bits of the words above,just read and make your own understanding,unless desperated which is the last resort :)

Next articles still under the ethics topics but on the Relativism and absolutism.