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financeaccountingus · 10 months ago

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Sarbanes Oxley Act 2002 Unleashed: Navigating US Accounting Regulations with Ease.

Sarbanes Oxley Act 2002 Unleashed: Navigating US Accounting Regulations with Ease.

Unleash the power of Sarbanes Oxley Act 2002! Our guide takes you on a journey through US Accounting Regulations, providing clarity and practical insights for seamless compliance.

In the intricate tapestry of U.S. accounting regulation, the Sarbanes Oxley Act (SOX) stands as a defining thread, woven to address the systemic vulnerabilities exposed by corporate malfeasance in the early 2000s. This legislation, named after its architects Senator Paul Sarbanes and Representative Michael Oxley, represents a paradigm shift in the governance and transparency landscape. It is also known as Public Company Accounting Reform and Investor Protection Act in Senate and Corporate and Auditing Responsibility and Transparency Act in House of Representatives but it is more commonly known as Sarbanes Oxley Act or SOX or Sarbox. Let’s embark on a detailed exploration of the Sarbanes Oxley Act, examining its historical context, core provisions, and its profound impact on corporate governance, financial reporting, and the global regulatory milieu.

Introduction

1. The Genesis of Sarbanes Oxley Act

The Sarbanes Oxley Act, born out of the crucible of corporate scandals, emerged as a legislative beacon in 2002. Its genesis lies in the corporate implosions of Enron and WorldCom, seismic events that eroded public trust and underscored the imperative for a robust regulatory framework. Other scandals included Tyco International, Adelphia, Peregrine Systems. Sarbanes Oxley Act crystallized as a response, a legislative apparatus crafted to restore integrity, accountability, and investor confidence.

2. The Regulatory Epoch: Sarbanes Oxley Act’s Lasting Significance

To fathom the significance of Sarbanes Oxley, one must transcend its role as a reactive measure. It heralded a new regulatory epoch, where the onus on corporate responsibility and governance took center stage. This act became synonymous with a higher standard of transparency, not merely as a legal obligation but as an ethical imperative in the corporate domain. The Sarbanes Oxley Act contain 11 sections and it is required by Security and Exchange Commission (SEC) for implementing the rulings and ensure the compliance with the law.

Section 1. Historical Context

1.1. The Corporate Landscape Pre-SOX

The pre-Sarbanes Oxley corporate landscape was characterized by unchecked corporate power, obscured financial dealings, and a glaring absence of regulatory teeth. Corporations wielded influence with minimal oversight, paving the way for unscrupulous practices that compromised the very foundation of shareholder trust.

Auditors Conflict of Interest:

Before the formation of Sarbanes Oxley 2002 the main “watchdogs” for investors were auditor and they were self-regulated instead of government regulated. They provided many management consultancy services to the companies along with the auditing services. Their management consultancy services were far more lucrative and attractive than the auditing services as per their agreements. So this create a conflict of interest for auditor because in audit observation challenging the companies accounting and reporting approach greatly damage the client relationship with the auditors.

Boardroom Failure:

Before enactment of Sarbanes Oxley Act 2002 board members who were responsible for oversighting the complete procedure of accounting and reporting on the behalf of investors were exposed. The financial scandals expose those board members who did not have any expertise and performed their responsibilities regarding the transparent reporting. The most important part of the board failure was that the audit committees were not truly independent of the management or board members.

Security Analysts Conflict of Interest:

Security analyst provide recommendations to investors for buying and selling of the securities and investment bankers provide loans to the companies and manage merger and acquisition process. This also create a conflict of interest because on one hand they provided recommendation on the specific buying and selling of security to investors and on other hand they provided the lucrative credit and loan facilities to the companies.

Low Budget of the SEC:

Before the formation of Sarbanes Oxley Act 2002, the budget of SEC was low but after the implementation of Sarbanes Oxley Act 2002 the budget of SEC increase nearly double and help SEC to strictly regulate and implement the Sarbanes Oxley Act 2002 to save investors from further fraudulent behaviors of companies.

Fraudulent Banking Practices:

The inappropriate practices of banking to issued loan to the companies were the main cause of bad debts. The investors of the banks were really hurt by such loans because they considered the issuance of loans to these companies as a signal of their good financial health. This resulted in paying the heavy price by huge amount of payments settlement by banks. This also rise the questions on the bank’s willingness to issuance of loans to these collapse companies and criteria on which these banks issued loans to the companies involved in financial fraud.

1.2. Catalysts for Reform: Enron and WorldCom

The implosion of Enron and WorldCom, emblematic of corporate hubris and financial deceit, served as catalysts for regulatory reform. The fraudulent machinations within these corporate behemoths revealed regulatory loopholes and a dire need for legislation that could anticipate and thwart such malfeasance. After its enactment President George W. Bush stated that “the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt. The era of low standards and false profits is over; no boardroom in America is above or beyond the law.”

This act also led to the formation of another quasi-public agency named as Public Company Accounting Oversight Board or PCAOB. This agency duty was to overseeing, regulating, inspecting and disciplining accounting firms in their role as auditors of the public companies. Sarbanes Oxley Act 2002 required the PCAOB to check the internal and external independence of the auditors for the first time in the history. PCAOB has four main duties to perform regarding the auditors of public companies and that are registration, inspection, standard setting and enforcement.

Section 2. Objectives of Sarbanes Oxley Act

2.1. Fortifying Corporate Governance

At its core, Sarbanes Oxley Act 2002 aspires to fortify corporate governance, redefining the responsibilities of executives and board members. By mandating a majority of independent directors on audit committees, the act aims to mitigate conflicts of interest, fostering a governance ethos grounded in transparency and accountability.

2.2. The Imperative of Financial Transparency

Sarbanes Oxley Act 2002 sets forth an unambiguous mandate for financial transparency, elevating it from a desirable attribute to an absolute imperative. Section 404, in particular, compels companies to scrutinize and disclose the effectiveness of their internal controls, ensuring that financial data is not only accurate but also fortified against potential manipulation.

2.3. Safeguarding Investor Interests

Investors, the lifeblood of financial markets, occupy a paramount position in the Sarbanes Oxley Act narrative. The act functions as a bulwark against corporate malfeasance, imposing stringent penalties for fraudulent activities and misrepresentation. It transforms the corporate landscape into a terrain where investor interests are safeguarded with unwavering resolve.

Section 3: Structure of Sarbanes Oxley Act 2022

Title 1: Public Company Accounting Oversight Board.

Establishment; administrative provisions.

Registration with the board.

Auditing, quality control, and independence standards and rules.

Inspection of registered public accounting firms.

Investigation and disciplinary proceedings.

Foreign public accounting firms.

Commission oversight of the board.

Accounting standards.

Funding.

Title 2: Corporate Responsibility.

Services outside the scope of practice of auditors.

Preapproval requirements.

Audit partner rotation.

Auditor reports to audit committees.

Conforming amendments.

Conflicts of interest.

Study of mandatory rotation of registered public accounting firms.

Commission Authority.

Considerations by appropriate State regulatory authorities.

Title 3: Corporate Responsibility.

Public company audit committee.

Corporate responsibility for financial reports.

Improper influence on conduct of audits.

Forfeiture of certain bonuses and profits.

Officer and director bars and penalties.

Insiders trades during pension funds blackout periods.

Rules of professional responsibility for attorneys.

Fair funds for investors.

Title 4: Enhanced Financial Disclosures.

Disclosures in periodic reports.

Enhanced conflict of interest provisions.

Disclosures to transactions involving management and principal stock holders.

Management assessment of internal controls.

Exemption.

Code of ethics for senior financial officers.

Disclosure of audit committee financial expert.

Enhanced review of periodic disclosures by issuers.

Real time issuer disclosure.

Title 5: Analyst Conflict of Interest.

Treatment of securities analysts by registered securities associations and national securities exchange.

Title 6: Commission Resources and Authority.

Authorization of appropriations.

Appearance and practice before commission.

Federal court authority to impose penny stock bars.

Qualifications of associated persons of brokers and dealers.

Title 7: Studies and Reports.

GAO study and report regarding consolidation of public accounting firms.

Commission study and report regarding credit rating agencies.

Study and report on violators and violations.

Study of enforcement actions.

Study of investment banks.

Title 8: Corporate and Criminal Fraud Accountability

Short title.

Criminal penalties for altering documents.

Debts nondischargeable if incurred in violation of securities fraud laws.

Statute of limitations for securities fraud.

Review of Federal Sentencing Guidelines for obstruction of justice and extensive criminal fraud.

Protection for employees of publicly traded companies who provided evidence of fraud.

Criminal penalties for defrauding shareholders of publicly traded companies.

Title 9: White Collar Crime Penalty Enhancements.

Short title.

Attempts and conspiracies to commit fraud offenses.

Criminal penalties for mail and wire fraud.

Criminal penalties for violations of Employees Retirement Income Security Act of 1974.

Amendment to sentencing guidelines relating to certain white-collar offenses.

Corporate responsibility for financial reports.

Title 10: Corporate Tax Returns.

Sense of the Senate regarding the signing of corporate tax return by chief executive officers.

Title 11: Corporate Fraud and Accountability.

Short title.

Tampering with a record or otherwise impeding an official proceeding.

Temporary freeze authority for the Securities and Exchange Commission.

Amendment to the Federal Sentencing Guidelines.

Authority of the commission to prohibit persons from serving as officers or directors.

Increased criminal penalties under Securities Exchange Act of 1934.

Retaliation against informants.

The irony of Sarbanes-Oxley is that what the SEC now demands is what good executives have been asking for all along. Gwen Thomas Editor /Columnist

Section 4. Key Provisions

4.1. Section 302: Corporate Responsibility for Financial Reports

The fulcrum of executive accountability, Section 302 of Sarbanes Oxley Act 2002 mandates that key corporate officers—typically the CEO and CFO—personally vouch for the accuracy and completeness of financial reports. This provision introduces a pivotal layer of responsibility, aligning executive actions with the financial health of the organization and assuring stakeholders of their commitment to accuracy. In other words, senior corporate executives and officers certify in writing that the company’s financial statements are true, transparent and material in all respect. Officers who signed the financial reports were subject to criminal penalties and imprisonment in case of not fully comply with SEC requirements.

The requirement is that the officers must assess the effectiveness of the company’s internal controls within 90 days prior to the report and include their conclusions about the effectiveness of those internal controls in the report, based on their evaluation as of that specific date.

Certainly! The responsibility of external auditors extends beyond just expressing an opinion on the accuracy of financial statements. External auditors are also required to evaluate and provide an opinion on the effectiveness of internal control over financial reporting maintained by management.

In the past, there was an additional requirement for auditors to issue a third opinion specifically related to management’s assessment of internal control. However, this requirement was removed in 2007.

Currently, external auditors focus on two main opinions:

4.1.1. Financial Statements Opinion: Auditors assess whether the financial statements present a true and fair view of the company’s financial position and performance in accordance with the applicable financial reporting framework.

4.1.2 Internal Control over Financial Reporting Opinion: Auditors evaluate and express an opinion on the effectiveness of internal control over financial reporting. This involves assessing the processes and safeguards put in place by management to ensure the reliability of financial reporting and the safeguarding of assets.

The removal of the third opinion regarding management’s assessment simplifies the reporting process, but it doesn’t diminish the importance of auditors’ scrutiny over both financial statements and internal controls. The goal is to provide stakeholders with assurance about the reliability of financial information and the effectiveness of the internal control environment.

4.2. Section 303: Improper Influence on the Conduct of Audits

This Section of Sarbanes Oxley Act 2002 appears to be an excerpt from securities or financial regulations, specifically addressing the unlawful actions of individuals associated with an issuer (presumably a company) in relation to the auditing process. Let me break down the key points:

4.2.1. Prohibited Actions:

Individuals Prohibited: The rules prohibit officers or directors of an issuer, or any person acting under their direction, from taking certain actions.

Prohibited Actions: It is unlawful for these individuals to fraudulently influence, coerce, manipulate, or mislead any independent public or certified accountant who is conducting an audit of the financial statements of the issuer.

Purpose of Prohibition: The aim is to prevent any actions that could lead to the financial statements being materially misleading.

4.2.2. Regulatory Authority:

Rulemaking Authority: The passage mentions that the Securities Exchange Commission has the authority to prescribe rules and regulations deemed necessary and appropriate in the public interest or for the protection of investors.

Enforcement: In any civil proceeding, the Commission has exclusive authority to enforce the rules outlined in this section, as well as any rules or regulations issued under this section.

In summary, this excerpt establishes regulations aimed at maintaining the integrity of financial statements by preventing fraudulent actions during the auditing process. The regulatory body (the Commission) is granted the authority to create and enforce rules in this regard.

4.3. Section 401: Disclosures in Periodic Reports (Off-Balance Sheet Items).

This section of Sarbanes Oxley Act 2002 discusses the attention drawn to off-balance sheet instruments, particularly in the context of Enron’s bankruptcy and Lehman Brothers’ use of a specific instrument, “Repo 105,” during the 2010 court examiner’s review of the Lehman Brothers bankruptcy. It also mentions the response to these incidents through the Sarbanes Oxley Act 2002.

4.3.1. Enron’s Impact:

Enron’s Bankruptcy: The bankruptcy of Enron brought attention to the fraudulent use of off-balance sheet instruments. Enron had engaged in deceptive practices involving such instruments.

4.3.2. Lehman Brothers and Repo 105:

Lehman Brothers’ Bankruptcy: The review of Lehman Brothers’ bankruptcy in 2010 highlighted the use of “Repo 105,” an off-balance sheet instrument. Lehman allegedly used this instrument to shift assets and debt off-balance sheet, presenting a more favorable financial position to investors.

4.3.3. Sarbanes–Oxley Response:

Disclosure Requirement: Sarbanes–Oxley mandated the disclosure of all material off-balance sheet items. This was a response to the deceptive practices observed in Enron and Lehman Brothers cases.

SEC Study: The legislation also required the Securities and Exchange Commission (SEC) to conduct a study and report on the extent of usage of such off-balance sheet instruments and whether accounting principles adequately addressed them.

SEC Report: The SEC’s report was issued on June 15, 2005, shedding light on the prevalence and nature of off-balance sheet instruments.

4.3.4. Regulatory Response and Critics:

Interim Guidance: In May 2006, the SEC issued interim guidance on off-balance sheet instruments, which was later finalized. This indicated a regulatory response to address the issues raised.

Critics’ Concerns: Despite these efforts, critics argued that the SEC did not take sufficient steps to regulate and monitor the use of off-balance sheet instruments, suggesting potential gaps in oversight.

4.4. Section 404: Internal Controls and Management Assessment

Section 404 of Sarbanes Oxley Act 2002 casts a discerning eye on internal controls, an often-overlooked linchpin of financial integrity. It necessitates companies to evaluate and publicly disclose the effectiveness of their internal controls over financial reporting. This provision not only fortifies the financial infrastructure but also instills confidence in stakeholders about the robustness of the company’s control mechanisms. This section imposes requirements on management and external auditors regarding the assessment and reporting of the adequacy of a company’s internal control on financial reporting (ICFR).

4.4.1. Section 404 of Sarbanes Oxley Act 2002:

Reporting Requirement: Section 404 of Sarbanes Oxley Act 2002 mandates that both management and external auditors report on the adequacy of the company’s ICFR.

Costly Implementation: It is noted that this section of Sarbanes Oxley Act 2002 is considered the most costly aspect of the legislation for companies to implement. The effort required to document and test important financial manual and automated controls is substantial.

4.4.2. Management’s Responsibilities under Section 404:

Internal Control Report: Management is required to produce an “internal control report” as part of each annual Exchange Act report.

Affirmation of Responsibility: The report must affirm the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting.

Assessment of Effectiveness: The report must also contain an assessment, as of the end of the most recent fiscal year, of the effectiveness of the internal control structure and procedures for financial reporting.

4.4.3. Use of Internal Control Frameworks:

Adoption of Frameworks: To fulfill the assessment requirement, managers typically adopt an internal control framework, such as the one described in the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In summary, Section 404 of the Sarbanes Oxley Act focuses on the reporting and assessment of a company’s internal controls on financial reporting. The requirements placed on management involve producing an internal control report, affirming responsibility, and assessing the effectiveness of internal control structures and procedures. This section is acknowledged as particularly costly for companies due to the extensive efforts required for documentation and testing.

4.5. Section 802: Criminal Penalties for Document Tampering

Section 802 (a) of Sarbanes Oxley Act 2002 stated that “Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.”

Recognizing the sanctity of financial documentation, Section 802 imposes criminal penalties for tampering, altering, or destroying records with the intent to obstruct federal investigations. This provision underscores the legal repercussions for compromising the integrity of financial records, serving as a deterrent against any attempts to manipulate critical documents.

4.6. Section 806: Civil Action to Protect Against Retaliation in Fraud Case i.e. Criminal Penalties for Defrauding Shareholders of Publicly Traded Companies

Section 806 of the Sarbanes Oxley Act (SOX), commonly known as the whistleblower-protection provision. This section aims to prevent retaliation against individuals who disclose potential or actual violations related to specific categories of misconduct within publicly traded companies.

4.6.1. Whistleblower Protection:

Covered Individuals: Section 806 of Sarbanes Oxley Act applies to a range of individuals associated with publicly traded companies, including officers, employees, contractors, subcontractors, or agents.

Prohibited Retaliation: It explicitly prohibits these individuals from retaliating against an employee who discloses reasonably perceived potential or actual violations falling under six enumerated categories of protected conduct.

4.6.2. Enumerated Categories of Protected Conduct:

Securities Fraud

Shareholder Fraud

Bank Fraud

Violation of SEC Rule or Regulation

Mail Fraud

Wire Fraud

4.6.3. Prohibited Retaliatory Actions:

Broad Range: Section 806 of Sarbanes Oxley Act prohibits a broad range of adverse employment actions as retaliation against whistleblowers. This includes actions such as discharging, demoting, suspending, threatening, harassing, or any other form of discrimination.

4.6.4. Notable Court Decision:

Protection against “Outing”: A federal court of appeals ruled that merely “outing” or disclosing the identity of a whistleblower is considered actionable retaliation. This underscores the importance of safeguarding the confidentiality and protection of individuals who report misconduct.

In summary, Section 806 of the Sarbanes Oxley Act establishes whistleblower protection for individuals associated with publicly traded companies. It prohibits retaliation against employees who disclose potential or actual violations falling within specified categories of protected conduct. The section is designed to encourage individuals to report wrongdoing without fear of adverse consequences, and recent legal decisions emphasize the significance of maintaining the confidentiality of whistleblowers.

4.7. Section 906: Corporate Responsibility for Financial Reports (Continued)

Complementing Section 302, Section 906 of Sarbanes Oxley Act 2002 imposes criminal penalties for corporate officers who willfully certify false financial statements. This dual-layered approach reinforces the gravity of providing accurate financial information, ensuring that executives bear personal consequences for any intentional misrepresentation.

If found guilty than those who certified the financial statements and report not willfully shall be fine of not more than $10,00,000 and imprisonment not more than 10 years or both and those who certified the financial statements and reports willfully shall be fine of not more than $500,000 and imprisonment not more than 20 years given to these officers.

Section 5. Impact on Corporate Governance

5.1. Transformation of Board Composition

Sarbanes Oxley brought about a transformation in the composition of corporate boards, particularly audit committees. The Sarbanes Oxley Act 2002 mandated a majority of independent directors on audit committees, reducing the influence of company insiders. This shift aimed to enhance the objectivity of board oversight, mitigate potential conflicts of interest, and foster an environment conducive to effective governance.

5.2. Enhanced Role of Audit Committees

Audit committees, traditionally tasked with overseeing financial reporting and external audits, assumed a more prominent role under Sarbanes Oxley. The Sarbanes Oxley Act 2002 mandated that these committees be comprised solely of independent directors, reinforcing their independence and objectivity. Audit committees became instrumental in safeguarding the integrity of financial disclosures and ensuring compliance with regulatory standards.

5.3. Evaluation of the Effectiveness of Corporate Governance Reforms

The effectiveness of corporate governance reforms introduced by Sarbanes Oxley remains a subject of ongoing evaluation. Proponents argue that these reforms have instilled greater accountability, transparency, and ethical conduct in corporate practices. Independent board oversight, strengthened by the Sarbanes Oxley Act 2002, is seen as a crucial component in preventing corporate misconduct and protecting shareholder interests.

Section 6. Financial Transparency and Reporting

6.1. Influence of Sarbanes Oxley on External Auditors

Sarbanes Oxley redefined the relationship between companies and their external auditors. The Sarbanes Oxley Act 2002 imposed restrictions on the provision of certain non-audit services to audit clients, aiming to preserve the independence and objectivity of external audits. This separation was deemed critical for ensuring that auditors could objectively evaluate and report on a company’s financial statements without any conflicts of interest.

6.2. Imperative of Accurate Financial Reporting

Accurate financial reporting became a central focus of Sarbanes Oxley. By holding corporate officers personally accountable for the accuracy of financial statements, the Sarbanes Oxley Act 2002 aimed to provide investors with reliable information for making informed decisions. This emphasis on accuracy not only contributed to the overall integrity of financial markets but also served as a deterrent against fraudulent reporting practices.

6.3. Case Studies Illustrating Improved Transparency and Disclosure

Examining case studies of companies that embraced Sarbanes Oxley reveals instances where improved transparency positively impacted financial reporting. Organizations that approached compliance not just as a regulatory requirement but as an opportunity to strengthen internal controls and governance structures reaped long-term benefits. These case studies serve as illustrations of how a commitment to transparency can enhance corporate reputation and investor trust.

Section 7. Compliance Challenges

7.1. Initial Hurdles Faced by Companies in Implementing Sarbanes Oxley

The implementation of Sarbanes Oxley Act 2002 presented initial challenges for companies, particularly in understanding and adapting to new regulatory requirements. Compliance with Section 404 of Sarbanes Oxley Act 2002, in particular, demanded substantial documentation and testing of internal controls, leading to concerns about the cost-effectiveness of the reforms. Companies struggled to strike a balance between meeting regulatory expectations and maintaining operational efficiency.

7.2. Evolution of Compliance Standards Over Time

Over time, the business landscape adapted to the new compliance standards introduced by Sarbanes Oxley. Companies invested in technology-driven solutions to streamline compliance processes, reducing the burden of manual documentation and testing. Regulatory authorities also provided guidance to help businesses navigate the complexities of compliance, contributing to the evolution of standardized and more efficient compliance practices.

Section 8. International Influence

8.1. Sarbanes Oxley’s Impact on Global Accounting Standards

Sarbanes Oxley’s influence extended far beyond U.S. borders, shaping global accounting standards. The Sarbanes Oxley Act 2002 served as a model for other nations grappling with corporate governance issues, prompting international entities to re-evaluate and strengthen their own regulatory frameworks. The emphasis on transparency, accountability, and investor protection set a global standard for ethical business practices.

8.2. Comparative Analysis with International Regulatory Frameworks

Conducting a comparative analysis of Sarbanes Oxley with international regulatory frameworks reveals both commonalities and differences. While many countries adopted measures inspired by Sarbanes Oxley, variations exist based on legal traditions, corporate structures, and cultural nuances. Understanding these differences is crucial for ongoing discussions about the global harmonization of accounting standards.

Section 9. Criticisms and Controversies

9.1. Debate on the Effectiveness vs. Burdensomeness of Sarbanes Oxley

Sarbanes Oxley has not been without its share of criticisms. A notable debate revolves around the balance between the Sarbanes Oxley Act’s intended effectiveness and the perceived burdens it places on businesses. Some argue that the stringent requirements, especially the documentation demands of Section 404 of Sarbanes Oxley Act 2002, impose significant financial and operational burdens, particularly on smaller companies.

9.2. Ongoing Discussions on Potential Amendments

The criticisms directed at Sarbanes Oxley have prompted ongoing discussions about potential amendments to the Sarbanes Oxley Act. Policymakers, industry experts, and corporate leaders engage in a continuous dialogue to identify areas where adjustments may be necessary. The objective is to refine the regulatory framework, addressing concerns without compromising the Sarbanes Oxley Act’s fundamental objectives of transparency, accountability, and investor protection.

Section 10. Case Studies

10.1. Success Stories of Sarbanes Oxley Implementation

Examining success stories of Sarbanes Oxley implementation unveils companies that not only navigated regulatory requirements adeptly but also leveraged the opportunity to enhance their internal controls and governance structures. These success stories serve as benchmarks, illustrating how proactive adherence to the principles of the Sarbanes Oxley Act 2002 can lead to not just compliance but also organizational resilience and sustainability.

10.2. Companies Facing Challenges in Compliance

Conversely, there are instances where companies faced challenges in achieving full compliance with Sarbanes Oxley. Factors such as organizational size, industry complexity, and the maturity of existing control frameworks contributed to varying levels of difficulty. Analyzing these challenges provides valuable insights into the nuanced dynamics of implementing regulatory reforms and underscores the need for flexibility in adapting to diverse organizational contexts.

Section 11. Evolving Landscape

11.1. Technological Advancements Reshaping Accounting Regulation

The landscape of accounting regulation continues to evolve, with technological advancements playing a pivotal role. Automation, artificial intelligence, and data analytics are reshaping how companies manage their financial information and comply with regulatory requirements. The integration of these technologies presents both opportunities and challenges for the future of accounting regulation.

11.2. Future Trends in Accounting Regulation

Anticipating future trends in accounting regulation requires an examination of emerging issues and global developments. The increasing prevalence of digital transactions, the rise of sustainable finance, and the impact of geopolitical factors all contribute to shaping the trajectory of accounting regulation. Understanding these trends is essential for businesses to proactively adapt to changing regulatory landscapes.

#accounting #banking #finance #investment #personal finance

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theinternalaudit · 2 years ago

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SOX Compliance: A Step-by-Step Guide to Understand SOX

The Sarbanes-Oxley Act popularly known as SOX compliance was passed by the US Congress in 2002 with the goals of safeguarding shareholders, the general public, and improving the integrity of corporate disclosures from accounting errors and dishonest business practices. The act establishes requirements for what must be done and specifies timeframes for doing so. Following the financial crises at Enron, WorldCom, and Tyco, among other firms, Congressmen Paul Sarbanes and Michael Oxley wrote the act to enhance corporate responsibility and governance. Now, all publicly traded companies must adhere to SOX's IT and financial standards. The way IT departments keep electronic business records has evolved as a result of SOX. The statute specifies which records should be retained and for how long, despite the fact that it doesn't specify how a business should store its data or establish a set of business practices. Businesses must maintain all business records, including electronic documents and messages, for "not less than five years" in order to comply with SOX. If you break the regulations, you risk being fined, imprisoned, or both.

Who Must Comply with SOX Compliance?

Today, SOX compliance is required for all publicly traded U.S. companies, all publicly traded non-U.S. companies that do business in the U.S., and all private companies that want to go public for the first time. This is to protect investors, clients, employees, accounting firms, and anyone else who might be affected. Companies that need to get and stay in compliance with SOX include: - Companies in the U.S. that are traded on public markets, including all wholly owned subsidiaries. - All publicly traded non-U.S. companies doing business in the U.S. Private companies in the process of getting ready for their first public offering (IPO). - Accounting firms or other businesses that provide services to any of the companies listed above.

Importance of SOX Compliance Audit

Practically, achieving and keeping SOX compliance is important for your business. However, many companies have found that a regular SOX audit has other benefits, such as: - Getting a better handle on things, - Improving documentation, - Getting the audit committee more involved, - Getting rid of or simplifying complex tasks, - letting security risks be managed more effectively and ahead of time, - Streamlining the auditing and reporting processes, which will increase productivity and cut costs, - Tightening up weak links, Companies that are owned by the public are more likely to want to buy companies that are going private.

Overview of SOX Compliance

Since more than 20 years ago, the Sarbanes-Oxley Act (SOX or Act) has been in effect. SOX compliance lets investors, customers, regulatory bodies, and the public know what's going on. Complete and consistent SOX compliance shows that you care about ethical accounting practices and gives people who depend on your organization confidence in you. Above all, the SOX act makes it illegal for any business, including private companies and nonprofits, to handle or get rid of financial records in an illegal way. They are also not allowed to get back at whistleblowers or hurt their rights in any way.

History of SOX Compliance

A government-issued law known as SOX sets criteria for financial information disclosure and record keeping. It was passed in response to the Enron, Arthur Andersen, WorldCom, and Tyco International scandals and is officially known as the Sarbanes-Oxley Act of 2002. Due to improper financial accounting methods, these enormous corporations had significant scandals in the late 1990s and early 2000s, leading to their final destruction. Clients, staff members, investors, accounting firms, and the company themselves all suffered as a result of these incidents. This demonstrated the need for tighter controls to stop fraud, whether it is done on purpose or accidentally. The SOX legislation was created by the U.S. Congress in an effort to safeguard stakeholders by reducing the likelihood of fraudulent accounting practices by businesses and auditing firms. In the interest of clients, staff, suppliers, and any other pertinent third parties, SOX was implemented to establish a uniform standard of care for a variety of public firms, as well as private businesses in some situations.

Key provisions of SOX Compliance

The key provisions of the SOX regulation are as follows: - Senior management accountability: The CEO and CFO of a publicly traded firm are directly accountable for the financial reports that are submitted to the Securities Exchange Commission (SEC). For infractions, these high officials risk serious criminal consequences, such as prison time. - Internal Control Report: According to SOX, a report proving management is in charge of the system of internal controls over financial records is necessary. To guarantee openness, any errors must be disclosed right once to high management. - Data security policies: Under SOX, businesses are required to uphold a documented data security policy that sufficiently safeguards the use and archival of financial data. All staff members should be informed of and adhere to the SOX data policy. - Proof of compliance - SOX mandates that businesses keep compliance records, make them available to auditors upon request, perform ongoing SOX testing, and track and evaluate SOX compliance goals.

Benefits of SOX Compliance

The best strategy you can use to ensure SOX compliance is to have compliance software in place. Some benefits of SOX compliance are: - - Good financial management: The SOX framework gives businesses everything they need to take better care of their financial records, which benefits many other areas of the business. Being compliant with SOX promotes effective and accurate financial reporting that develops a higher level of financial caretaking in your firm, much like ISO 27001 compliance. - More accurate reporting: Companies that comply with SOX report more stable financial conditions and simpler access to capital markets. Your ability to produce reports, whether they be for regulators, investors, or auditors, will be much enhanced by SOX. - Increased security: Companies are better protected from cyber-attacks and the pricey fallout from a data leak by following SOX. Data breaches are challenging to manage and fix, and some businesses never fully recover from the harm done to their reputation. The security measures that SOX mandates will significantly lessen the likelihood of a malicious hack or insider threat. - Increased cooperation: The internal team that SOX compliance creates strengthens communication between the departments conducting the audits. Improved cross-functional cooperation and communication are only a couple of the tangible consequences that a companywide programmed like SOX may have. - Prioritizing risks: You'll integrate a thorough risk management framework into the culture of your company while adhering to SOX. Corporate-wide process visibility and transparency, collaboration, and effective breach mitigation will all be advantageous to your company. You'll be able to allocate resources more effectively since you'll know precisely which cyber dangers to priorities.

SOX Compliance Audit Process

SOX audits examine internal policies and practices utilizing a COBIT-style control structure. The audit involves an analysis of log collections and monitoring systems for access and activities affecting sensitive business information. The main portion of a SOX compliance audit is typically the examination of a company's internal controls. All IT resources, including computers, network hardware, and other electronic devices that financial data goes through, are included in internal controls. IT security, access restrictions, data backup, and change management are all covered by a SOX IT audit. Also Read: The Internal Audit: A Comprehensive Guide

Conclusion

SOX compliance can be a big job, but it doesn't have to be hard all the time. SOX compliance should be seen as a chance to improve your financial reporting, cybersecurity, and access control. For SOX compliance, implementing new strategies and technologies like identity access management or automated data governance enforcement can also help your business in the long run. Lastly, you shouldn't think that complying with SOX is a "one and done" thing. Instead, it's a constant, year-round effort to improve financial controls and cybersecurity. SOX was made to stop criminals from stealing money and putting out false financial information. If you comply with SOX, you also get better visibility and efficiency with financial reporting and cybersecurity. Read the full article

#sox

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maturemenoftvandfilms · 3 years ago

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Paul Sarbanes (1933-2020) Physique: Average Build

Paul Spyros Sarbanes was an American politician and attorney. A member of the Democratic Party from Maryland, he served as a member of the United States House of Representatives from 1971 to 1977 and as a United States Senator from 1977 to 2007. Sarbanes was the longest-serving senator in Maryland history until he was surpassed by Barbara Mikulski by a single day when her term ended on January 3, 2017. He was the first Greek American senator. Sarbanes died at his home in Baltimore on December 6, 2020, at the age of 87.

Sarbanes was a handsome senator back in the day. I'd say all Democrats were back in his day. He is all about democracy. Umm... he was married with three children. Ooh, ooh, he was Greek. Did I say that already? No sex scandals that I am aware of and given that he was a politician during the 70s to 2000s, that seems like a superhuman feat. Well, Sarbanes was known for his low-key style, often shunning the limelight over his thirty-year Senate career. I'm really sorry. He was very cute looking but, fuck, he was kinda boring. You know the sex he got would never have been that good. At least I have my fantasies of him.

#Paul Sarbanes #mydaddywiki #mydaddywiki politicians #american politician #politician

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idvoteforthatdaddy · 3 years ago

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Robert Byrd (1917-2010) Former member of the United States Senate

Three things always come to mind when I see a pic of Robert Byrd.

He was a handsome silverfox.

He was a former member of the KKK.

Two black guys with at least 10" cocks, split roasting him.

On a Side Note: Oh, a young Paul Sarbanes behind Byrd in the first pic.

#Robert Byrd #Paul Sarbanes

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correctsuccess · 4 years ago

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Paul Sarbanes, co-author of SOX accounting law, dies at 87 | Article The dying of Sarbanes, in his native Baltimore, was announced by his son, Rep. John Sarbanes (D-Md.) “Our household is grateful to know that we now have the assist of Marylanders who meant a lot to him and whom he was honored to serve,” John Sarbanes wrote. Higher often known as SOX, the laws that got here to be named for Paul Sarbanes and Rep. Michael Oxley (R-Ohio) was written in response to... #accounting #article #coauthor #correct_success #credit_cards #credit_score #dies #finance #financial_health #law #paul #sarbanes #sox

#accounting #Article #coauthor #correct_success #Credit_Cards #credit_score #dies #Finance #Financial_health #Law #Paul #Sarbanes #Sox

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deenewsline · 4 years ago

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Paul Sarbanes, Former Maryland Senator, Dies at 87

Mr. Sarbanes graduated in 1954 and won a Rhodes Scholarship, attending Balliol College at Oxford and taking a second bachelor’s degree in 1957. He earned a law degree at Harvard in 1960. He clerked for a federal judge, worked as an aide to Chairman Walter W. Heller of President Kennedy’s Council of Economic Advisers, practiced law in Baltimore and was executive director of a commission writing a…

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#Dies #Maryland #Paul #Sarbanes #Senator

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un-deads · 4 years ago

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Governança Corporativa: O que é e Como Implantar?

Lei Sox e o Destaque da Governança Corporativa Em julho de 2002 o senador Paul Sarbanes do partido Democratas (03/02/1933 – 06/12/2020) e o deputado Michael Oxley do partido Republicanos (11/02/1944 – 01/01/2016), após escândalos financeiros envolvendo as empresas norte-americanas Xerox e Eron, tomaram a inciativa de criar o que seria a maior reforma no mercado de capitais desde a crise…

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#Auditoria #Compliance #gestão #Governança Corporativa #Lei Sarbanes-Oxley #Lei Sox #Mercado de Capitais

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douchebagbrainwaves · 4 years ago

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HERE'S WHAT I JUST REALIZED ABOUT PAY

Whereas if you start a startup. It's not something you have to be. I couldn't help thinking, how will this sound to investors? Anyone who has used the web for more than a couple hours, and you'll find you have much less spare time than you might expect. I may be an extremist, but I didn't have the smoothness of a good idea. There's no reason to do it. But Sam Altman is a very unusual guy. This is actually a rational response to their situation.

No, as it were. If you're going to have to work at something that pays the bills too, even though the advertisers are paying and users aren't. You could sense them squirming on the hook, but you need it in a way that doesn't suck. For practically its whole existence, that is. And it's a skill you can learn, though perhaps habit might be a good idea? Something is going on here. Really this just codifies what we do already. I didn't have the smoothness of a good novel wouldn't complain that readers were unfair for preferring a potboiler with a racy cover. At a good college you're concentrated together with a lot of people think we get thousands of applications for each funding cycle. I find myself repeating is pump out features.

Seattle owes much of its position as a tech center because it's the intellectual capital of the US and probably the world. In nearly every startup that fails, the proximate cause is running out of money. I haven't seen it. This is a rare case where being less self-centered will make people more confident. Ironically, Microsoft unintentionally helped create Ajax. I can say is, try hard to do it is to be undisciplined. The finance guys seemed scrupulous about reporting earnings. But if this is your attitude, something great is very unlikely to happen to you, because the locations of mines and factories were determined by features like rivers, harbors, and sources of raw materials. We officially launched in early 1996. There seem to be: that in the coming century is a huge one. But that doesn't make common stock a bad idea.

Nearly every startup that fails, fails by running out of money while you're trying to negotiate with them. By historical standards, that's something that's changing pretty rapidly. I'm sure the default will always be to get a job. In a technology startup, which most startups are, and assume that's how things have to be determined. So here is an even more striking statistic: 0% of that first batch had a terrible experience. This is particularly necessary in a startup hub. What do I mean by good people? The founders of Kiko, for example. Let's start with the obvious one: lobby to get Sarbanes-Oxley deters people like him from being CFOs of public companies, that's proof enough that it's broken. 064. A lot of startups worry what if Google builds something like us?

So what if some of the fund back to the institutional investors who supplied it, because it wasn't going to be negative. Usually a startup is more than you'd endure in an ordinary working life. That was her actual word. You can measure this in your growth rate. So not only does the desktop no longer matter, no one can make you do it. Industrialization didn't spread much beyond those regions for a while. The question is not whether you can afford to be passive. That will change if you get a zero otherwise. Enough of an effect to triple the value of what they create.

As usual, by Demo Day about half the startups were doing something significantly different than they planned. Just continue running your company as if this deal didn't exist. When you're a kid and you face some hard test, you may also be ready to start that startup. If your startup is doing a deal, just assume it's not going to be different is my approach. Everyone likes to believe that's what makes startups worth the trouble. So as long as you made a serious effort. Recently I suggested a potential shortcut: pay startups to move. I wouldn't be surprised if one day people look back on what we consider a normal job. No one likes schleps, but hackers especially dislike them. Maybe that's possible, but I don't think you'd want to; someone who really, truly doesn't care what his peers think of him is probably a running back.

Thanks to Paul Buchheit, Savraj Singh, Bob Frankston, Trevor Blackwell, Joel Rainey, and Joe Gebbia for sharing their expertise on this topic.

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neartheelevators · 4 years ago

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Paul Sarbanes... was still alive? Nice knowing you. Smell ya later. What have you done for me lately besides put your kid in an unbeatable incumbency advantage where he can laugh off town halls and constituent comms?

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theinternalaudit · 2 years ago

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SOX Compliance Requirements

Have you frequently heard the term "SOX Compliance Requirements" but do not know its exact meaning? if so, you're in the right place. In western nations like the United States of America, SOX is largely governed through mandatory legislation. Even if SOX compliance requirement is not relevant in your nation, you still need to be aware of it if you work for an KPO that manages US company from your country. In this article, you will learn about the SOX Act's brief background, who is subject to its obligations, and an explanation of SOX compliance requirements. You will be given a road map of the steps businesses must take and the issues they need to address while getting ready for a SOX compliance requirement audit.

What does SOX Compliance Requirements Mean?

SOX compliance requirement is an annual obligation derived from the Sarbanes-Oxley Act (SOX) that requires publicly traded companies doing business in the United States to establish financial reporting standards, such as protecting data, tracking attempted breaches, logging electronic records for auditing, and demonstrating compliance.

Brief history and background of the Sarbanes-Oxley Act (SOX)

The Sarbanes-Oxley Act (also known as the SOX Act) is a federal law in the United States that attempts to safeguard investors by improving the veracity and accuracy of business disclosures. Major accounting scandals like Enron and WorldCom (now known as MCI Corp.), which deceived investors and artificially boosted stock prices, served as the impetus for the Act. Business record protection is a key component of SOX compliance. Modern business practices dictate that it frequently refers to the security of your digital information kept in corporate clouds like G Suite and Office 365. The Act was introduced by Senate Paul Sarbanes and Representative Michael Oxley, and on July 30, 2002, President George W. Bush signed it into law. The SOX Act consists of eleven elements (or sections). The most important SOX compliance requirements are considered to be 302, 401, 404, 409, 802, 806 & 906. Compliance in these areas is especially important for organizations engaged in data protection.

Which Companies Must Comply with SOX Compliance Requirements?

SOX compliance requirements must be complied with by all publicly traded companies, wholly owned subsidiaries, and foreign publicly traded companies with operations in the United States. It also applies to public company auditing accounting firms. SOX creates a barrier between auditing and accounting firms. The firm that audits the books of a publicly traded company is prohibited from performing bookkeeping, audits, and business valuations for the company, as well as designing or implementing information systems, offering investment advisory and banking services, and consulting on other management issues. Private businesses, charities, and non-profits are not required to comply with SOX compliance requirements in its entirety; however, they should not knowingly destroy or falsify financial data. SOX also imposes penalties for noncompliance on organizations. In addition, whistleblower protection applies, such that retaliation against a person who informs a law enforcement officer about a possible federal offence is punishable by up to ten years in prison. Before planning an Initial Public Offering (IPO), private companies must comply with SOX compliance requirements. Lastly, SOX compliance requirements are for the establishment of payroll system controls. A company must account for its workforce, salaries, benefits, incentives, paid time off, and training expenses. Certain employers are required to implement an ethics programmed consisting of a code of ethics, a communication plan, and staff training.

Explanation of the SOX Compliance Requirements

As SOX compliance requirements is vital to the survival of your business, these are the additional sections of Sarbanes-Oxley that you should pay attention to: SOX Section 302: Corporate Responsibility for Financial Reports The Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of a corporation are directly responsible for the certification and recording of all financial reports submitted to the SEC. Establishing audit committees, pay committees, and disclosure committees comprised of board members and obtaining competent legal assistance can assist in enhancing internal controls and limiting business liability. Since SOX compliance requirements Section 302 is intended to protect against inaccurate financial reporting, ensure that your verifiable security controls that prevent data tampering, establish timelines, and track data access are operational, reviewed periodically for effectiveness, and capable of detecting security breaches. Section 401: Disclosures in Periodic Reports All of the company's periodic financial statements should include any significant off-balance sheet liabilities, obligations, and transactions, be audited by a certified public accounting firm, and be made public. Section 404: Management Assessment of Internal Controls Section 404 is the most difficult, debatable, and expensive for SOX compliance requirement. It mandates that all annual financial reports include an Internal Control Report stating that management is responsible for an "adequate" internal control structure and an evaluation of the control structure's effectiveness by management. All deficiencies must also be reported. Moreover, a registered independent auditor must attest to the veracity of management's assertion that internal accounting controls and the internal control framework are in place, operational, and effective. Both management and the external auditor are responsible for conducting their assessments within the context of a top-down risk assessment, which requires management to base the scope of its assessment and the collected evidence on risk. SOX Section 409: Real Time Issuer Disclosures To protect investors and public interest, any changes in a company's financial status or activities should be presented in near-real time utilizing trend and qualitative data and graphical representations. SOX Section 802: Criminal Penalties Altering, destroying, mutilating, concealing, or falsifying financial records, documents, or tangible objects with the intent to obstruct, hinder, or influence legal investigations is punishable by up to 20 years in prison under Section 802. In addition, it imposes penalties of up to 10 years on any accountant, auditor, or other individual who willfully and knowingly violates the requirement to maintain audit or review documents for a period of 5 years. Section 806: Sarbanes Oxley Whistleblower Section 806 encourages the disclosure of corporate fraud by providing protection for employees of publicly traded companies and their subsidiaries who report illegal activities. It authorizes the U.S. Department of Labor to protect whistleblower complaints against retaliatory employers and authorizes the Department of Justice to file criminal charges against those responsible for the retaliation. SOX Section 906: Financial Reporting All of the company's financial statements included in periodic reports should be certified by the CEO and CFO with a written statement, in addition to the one required by Section 302, that they fully comply with the requirements and that the information contained therein fairly represents the financial condition and results of operations of the company.

Preparation for a SOX Compliance Requirement Audit

Update your reporting and internal audit systems so that you can quickly retrieve any report the auditor requests and verify that your SOX compliance software is operating as intended, thereby preventing unanticipated problems. Your SOX auditor will concentrate on four key internal controls during the annual audit. To demonstrate SOX compliance requirements, your organization must demonstrate the following four primary security controls: 1. Secure Access Control Management Access control covers both physical and electronic controls, such as role-based access control (RBAC), the principle of least privilege, and permission audits. By maintaining a robust permissive access model, you can demonstrate that each user has access to only the information they require to perform their duties. Limiting user access to only the essential controls can significantly reduce the risk of unauthorized access in the event of a breach. 2. Security Security signifies the ability to demonstrate security controls that prevent data breaches, stop data leaks, and mitigate cyber threats. Typically, this will consist of vendor risk management, continuous security monitoring, and attack surface management. 3. Data Backup The Sarbanes-Oxley Act (SOX) compliance requirements mandates that all financial records must be backed up off-site in compliance with SOX. SOX also regulates any central data center containing backed-up data. 4. Change Management SOX compliance requirements mandates that you have defined procedures for adding and managing users, installing new software, and making changes to databases and applications that manage a company's finances.

Final Review

There are several important components of a SOX compliance requirements audit to keep in mind: - Ensure that the CEO, CFO, and all other executive members and those in charge of financial management are on the same page. - Make your financial records public in accordance with federal law. Your company's finances should be accurately represented in quarterly and annual reports. - Keep track of your physical and electronic internal controls. This is the largest and most comprehensive portion of the audit. Partnering with a reputable cybersecurity company to assess and test your internal control components would be highly advantageous. - If any of your financial matters or business operations change, be sure to notify the public and document that they were informed in a clear manner. - Do not alter, destroy, or tamper with audit-related financial documents for any reason. Read the full article

#SOXCompliance

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maturemenoftvandfilms · 4 years ago

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The Senate of Days Gone By. Back in the 80s and 90s the senate was way more fuckable than it is today. Compared to now, democrats were just a hot as the republicans. Check this table out.

Howell Heflin (D) - Sure he had his pant up to his nipples at times, but he had his moments of hotness. Paul Sarbanes (D) - I’d blown him. George Mitchell (D) - Would have blown him too. Sam Nunn (D) - He could have gotten some. David Boren (D) - Apparently, we had a shot with him. William Cohen (R) - He could had gotten anything he wanted from me. Unknown guy #1 sitting - Don't know who he is, but he too could have gotten some. Bob Dole (R)- I bet he had a mean grip with that bad had of his. What? Was that in bad taste? Robert Byrd (D) - Sure he was a former member of the Klan, but back then I didn't know that. Daniel Inouye (D) - I thought he was cute. Unknown guy #2 standing - I can't tell who he is, but again, he could have gotten some.

Now look at that list. Most of them are democrats. So fuck all you who think I support republicans. I support hotness, no matter what party they belong to.

#american politician #politician #Howell Heflin #Paul Sarbanes #George Mitchell #David Boren #Bob Dole #Robert Byrd #Daniel Inouye #William Cohen #PILF #suit & tie #eye glasses

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thinkveganworld · 5 years ago

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Reagan Administration Undermined the Constitution - A Cautionary Tale from History

Written by “thinkveganworld.tumblr.com”

I wrote this series of articles on Iran-Contra a few years ago. Many people who lived through the episode then, and most people today, don’t understand the scandal. For anybody who might want to know what Iran-Contra was about, I thought I’d re-post this updated version. This is Part One, and I’ll add Parts Two and Three later.

Ronald Reagan, George H. W. Bush, and other members of the Reagan Administration participated in a cover-up of Iran-Contra during the 1980′s, and the cover-up continues to this day.

Americans often either wince or yawn at the mention of Iran-Contra, a scandal lost to memory for most of us. However, the story is important now because the son of one of the Iran-Contra participants is running for president. [When I wrote this article the candidate was George W. Bush.] The elder Bush lied to the public when he claimed he was "out of the loop" on Iran-Contra.

People might find Iran-Contra interesting if it were more accurately named. An apt name for Iran-Contra would be the "Republicans-Undermine-the-Constitution" scandal. If the public fully understood that George W. Bush's father participated in a forceful assault on the Constitution, George-the-Younger would not likely be the GOP front-runner today.

One reason Iran-Contra is lost to the American memory is that television news commentators did not do a good job explaining it to the public. The problem is not that mainstream media censored the story. They did not. Print journalists ran detailed accounts, and the Iran-Contra hearings were televised. The problem is, many Americans get all their news from television newscasts. Many people believe a news story is important only if TV journalists discuss it on news talk shows day after day. [Iran-Contra happened at a time before the Internet was open to the public and long before YouTube existed.]

Television journalists did not repeatedly dissect Reagan's and Bush's behavior and explain the constitutional implications of Iran-Contra. Journalists did manage to set aside enough air time to saturate the public with detailed explanations of the Clinton scandal. If TV commentators had spent an equal amount of time sifting through and explaining Iran-Contra, most Americans would now fully understand why the scandal mattered and how it threatened our constitutional system. If journalists understood Iran-Contra, they would not say George W. Bush's father had a "clean presidency."

This week I replayed 1987 and 1990 broadcasts of "PBS Frontline" with Bill Moyers on the subject of Iran-Contra. I also re-read substantial portions of the "Report of the Congressional Committees Investigating the Iran-Contra Affair" published by the New York Times (Times Books, 1988.) The Moyers broadcast and the Congressional Report are the sources for all the information which follows, except where I specify other sources.

Moyers says that Congress's report on the Iran-Contra affair shows "the common ingredients of the White House policies were secrecy, deception, and disdain for the law." Moyers is right. The Congressional Report does show the Reagan White House deceived the American people and expressed contempt for the Constitution and the law.

The Congressional Report says: "The President did know of the Iran arms sales, and he made a deliberate decision not to notify Congress. ... As a consequence of the President's decision not to notify Congress, the operation continued for over a year through failure after failure, and when Congress finally did learn, it was not through notification by the Administration, but from a story published in a Beirut weekly."

President Ronald Reagan repeatedly told the American people he would not negotiate with terrorists. That was a lie. A November 3, 1986 report in a Lebanese magazine broke the story that Reagan was bargaining with the Ayatollah Khomeni for release of American hostages. Moyers shows footage of Reagan looking straight into TV cameras denying it. Reagan lied to the public again during a news conference the following week, claiming there were no U. S. sales of arms to Iran.

Reagan also lied to the American people about the nature of the Contras and the purpose of their operations. Reagan and CIA director William Casey created the Contras. Reagan portrayed them as democratic "freedom fighters," but the Contras' ultimate goal was the overthrow of the Nicaraguan government, a government legally recognized by the United States.

The Contras were not interested in promoting democracy, as Reagan claimed. A March 1986 report by the human rights monitoring group America's Watch said: "The testimony we obtained frequently showed gratuitous brutality: the Contras not only murdered their victims; they also tortured and mutilated them. In some cases they also killed members of the families of their targets." (William D. Hartung, AND WEAPONS FOR ALL.)

Around 70 percent of the American people disapproved of Reagan's Central American policy, but he zealously (and secretly) pursued it anyway. When CIA agents under Reagan's CIA director Casey mined Nicaraguan harbors and blew up fuel tanks, Congress cut off Contra funds. Reagan then secretly and illegally turned to foreign governments for money to keep the Contras going. He lied about that to the American people, too.

The Reagan White House enlisted a group called the "Enterprise" to help get around the law. General Richard Secord defined the Enterprise during the Iran-Contra hearings. He said, "The Enterprise is the group of companies that Mr. Hakim formed to manage the Contra and the Iranian project. ... I exercise overall control." Secord admitted to the Congressional Committee that he sold arms to the Contras for a profit.

The Enterprise included, in Moyer's words, "a shadowy network of arms dealers, fraudulent companies, and secret bank accounts." Senator Daniel K. Inouye, chairman of the Senate Select Committee, described the Enterprise as a "shadowy government with its own Air Force, its own Navy, its own fund-raising mechanism and the ability to pursue its own ideas of the national interest, free from all checks and balances, and free from the law itself."

Enterprise leader Richard Secord purchased 1,000 missiles from the CIA for $3.7 million. He sold them to an Iranian middle man for $10 million. The Enterprise made millions of dollars of profits from sales to Iran, and most of the money did not reach the Contras. Around $8 million remained in a private Swiss bank account at the time of the Moyers broadcasts.

During the Iran-Contra hearings, Senator Paul Sarbanes asked Secord, "If the purpose of the Enterprise was to help the Contras, why did you charge [Contra leader] Calero a mark-up that included a profit?" Secord answered, "We were in business to make a living, Senator. We had to make a living. I didn't see anything wrong with it at the time."

Bill Moyers says, "While profits were being made, lives were being lost. ... In Nicaragua the Contras use weapons from the Enterprise against civilians. It is a terrorist war they are fighting. Old men, women, children are caught in the middle." Lt. Col. Oliver North learned the Contra leaders were not noble "freedom fighters." North's liaison with the Contras, Robert Owen, told North in a memo that the people surrounding Contra leader Adolfo Calero "are not first-rate people. They are liars, greed and power motivated. This war has become a business to many of them."

Moyers interviewed a disillusioned former Contra officer. The officer said of Contra leaders, "They bought shoddy goods and sold them at hiked up prices. They bought low-grade grains...and put them up for sale or billed them to themselves at the highest prices. They did the same with ammunition. They did the same with rifles."

"All this," says Moyers, "the contempt for Congress, the defiance of law, the huge mark-ups and profits, the secret bank accounts, the shady characters, the shakedown of foreign governments, the complicity in death and destruction -- they did all this in the dark, because it would never stand the light of day. Secrecy is the freedom zealots dream of. No watchman to check the door. No accountant to check the books. No judge to check the law. The secret government has no Constitution. The rules it follows are the rules it makes up."

The Reagan Administration repeatedly lied to the American people throughout the Iran-Contra scandal. In fact, Reagan, Bush, and the other Iran-Contra participants managed to get away with their wrongdoing precisely because they lied, stalled, stonewalled, and participated in a cover-up -- not because they were innocent, as many of their supporters still believe.

The many lies of both President Ronald Reagan and Vice President George H. W. Bush, and further details of the Iran-Contra operations, will be the subject of the next article in this series.

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