Implementing Sarbanes-Oxley

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Implementing Sarbanes-Oxley within an Environment: Understanding the controls used to implement Sarbanes-Oxley within an environment Recent high-profile corporate scandals (Enron, WorldCom, Tyco and Arthur Andersen etc.) have shattered the trust, of shareholders, legislators and authorities, in major publicly traded companies and have raised concerns for the state of corporate governance, not only in the United States, but also in other countries of the world. The United Kingdom is not immune to the wave of business fraud, corporate scandals, legislation changes and corporate environment restrictions. With the filing of bankruptcies, the US government had taken immediate action to prevent fraud in the future by enacting the Sarbanes-Oxley Act of 2002 (SOX), administered by the Securities and Exchange Commission (SEC). Similar restrictions and legislations have also been adopted in the UK, in an attempt to curb fraudulent acts from proliferating to the other side of the Atlantic through multinational public companies trading in the UK. SOX is a legislation designed to eliminate financial fraud and misstatements by greedy executives, unethical corporate practices and non-transparent business transactions. While SOX has redefined the roles, responsibilities and expectations of the board of directors, internal and external auditors, it has also reformed the practices within organizations. At the heart of the enactment of SOX is the implementation of control to oversee senior management, to secure accurate financial reporting information. Two major requirements of SOX are disclosure of material events and contingent liabilities (Rasch 2005). For this purpose, the role of information technology security has become enhanced, as it is expected to ensure transparency in decision-making, reliability and integrity in the system of disclosure. Yet IT experts are of the view that IT has a vague role in making SOX effective. IT security in SOX context is limited to the extent of enhancing reliability and integrity in reporting, and it does not contribute towards prevention of fraud or unethical corporate behaviours. It cannot prevent senior management from engaging in financial misstatements; neither can it curb executives from over-arching organizational controls and processes. The questions that arise then are ‘what is the role of IT under SOX? What are the scope, narrative and control matrix for IT professionals within SOX environment? Are the frameworks for SOX implementation effective in achieving SOX objectives?’ Before the researcher attempts to answer these questions, a brief background to the emergence of SOX, and why it is needed, must be explored. The turn of the century saw a series of corporate scandals of companies such as Enron, WorldCom and Tyco etc. Their executives had been involved in unethical corporate practices that affected shareholders and stakeholders, alike. Enron and WorldCom filed for bankruptcies (which were followed suit by others) as a result of fraudulent accounting practices and executives’ greed. Not long before the issues surrounding Enron and WorldCom were resolved, Arthur Andersen, the auditing firm, was charged for malpractice, especially in non-disclosure of fraudulent financial transactions and reportage. At the time, not only the morals of corporate executives had come under scrutiny, but the gatekeepers of the same companies,

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