ACC 290 Week 5 Learning Team Reflection Summary

Week Five Reflection Summary 
The team members’ knowledge continues to grow.  Week five mainly covered the effect of the Sa Sarbanes-Oxley Act of 2002 on internal controls.
 
The Sarbanes-Oxley Act of 2002 was put into place because of shady accounting practices.  One of the biggest accounting scandals was the Enron scandal in 2001.  Enron was one of the largest producers of natural gas and electricity.  To the outside world, it was the company to invest in.  It mostly started in November 1997.  Enron bought out a partner’s share in a company called JEDI (Time Specials, 2011).  They sell it to a firm they created called Chewco that an Enron manager would run (Time Specials, 2011).  This is how Enron begins to hide their debt.  In November 2001, Enron admits to accounting errors that inflated income by $586 million since 1997, and on December 2, 2001, Enron filed for bankruptcy (Time Specials, 2011).  The Securities and Exchange Commission discovered accounting scandals and lies from Enron and its accounting firm Arthur Anderson, which causes investors to lose billions (Ponzio, 2007).
 
            Therefore, the Sarbanes-Oxley Act of 2002 demand that managers of the publicly traded companies set up and preserve structures of internal control on the business’ financial processes.  The act also demands that top management of the companies provide certifications in regard to the accuracy of their financial statements.  This system has changed greatly the practice of accounting because it not only regulates the financial records of the businesses, but also it proposes penalties for their abuse.  The act describes the kind of records companies should record and their length.  It also makes sure every financial data is correct because one function of the act is to prevent and detect falsification of data made by organizations.  Therefore, because of the Sarbanes-Oxley Act of 2002 the responsibility of employees has increased in providing accurate financial report, which in turn minimizes the occurrence of financial errors.
 
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