16) When the bank used the accounting statement created by Alice to approve the $1,000,000.00 loan, did this make Alice violate the Sarbanes-Oxley Act of 2002? Explain the Sarbanes-Oxley Act?

SOURCES

MICHAEL

Michael Jackson was hired in January as the new Operations Manager for "Just Collect It, Inc", a Texas toy assembly plant also known as JCI. As the Operations Manager Michael's duties included contract negotiations, accounts receivables & payables, Human Resources & scheduling, shipping & receiving and purchasing. Michael recognized that the duties agreed upon were customarily performed by 3-5 people, and or 3-5 departments, but due to budget concerns JCI was convinced that the right Operations Manager would be effective in all of the assigned tasks. Michael was aware that the 5 previous Operations Managers were overwhelmed with the job duties and resigned within 6 months of being hired. Michael was informed upon hiring that JCI did not have a Contracts, Account Receivable, HR, Shipping and or Purchasing department or positions because of budget restrictions and they had 2 absolutely no intention of filing the positions. Michael was convinced that he had the solution to succeed at each duty. As operations manager Michael would receive an annual salary of $250,000. Michael realized that he truly needed 4 senior type positions, which required experience and education, to assist him to assist him to success. The collective salary for all 4 of the positions needed would be over $250,000. He knew the company would not budget for the additional help so he had to make an alternative solution to succeed. Once Michael took over the leadership role, while being fully aware of the corporation's decision not to hire any additional labor, he made the executive decision to hire 4 inexperienced recent high school graduates to handle some of the task that was assigned to him. Michael had success in the past hiring "fresh minds" as he calls it. He enjoyed training young employees in the methods he preferred them to use. Hence, he hired Carl to handle the contracting, Alice for general accounting and Accounts receivable, Harry for HR demands and scheduling and Paula for purchasing. Michael retained all the other duties and felt his time would be best spent keeping a close eye on the new hires and overseeing the assembly workers. To offset budget concerns Michael used $72,000.00 of his $250,00000 and paid the new hires directly from his personal account. Their employment setup provided for pay only, they did not receive any health, retirement, 401K or workman compensation. They did not have any federal or social security withholdings. They were scheduled to receive their full hourly rate without deduction every Friday. Each employee would receive $18,000.00 annually in pay. The experienced professional would have commanded $62,500.00 for the position.

ALICE

??On Alice's first day on the job she noticed that Company X was had 2 years of outstanding accounts receivables to JCI totaling $10,000.00. She knew Company X was a start-up company and wanted to give them a fresh start as Xavier the owner of the company just happened to be her favorite uncle. The second week on the job Alice created an Accounting statement which showed that Company X had paid his account JCI in full. Subsequent to Alice creating the 3 accounting statement JCI applied for a $1,000,000.00 with Bank Generous. Bank Generous used the Accounting statement that Alice created to approve the loan to JCI. Their approval was based on numbers that were off by $10,000.00. The bank president informed the JCI executives that they just barely fit the requirements for the loan. They also mentioned that had their numbers be off by as much as $100, they would not have qualified for the loan.  

 

Yes, Alice  did violate the SOX as Company X owner was his uncle and she granted the loan out of personal reasons. 

Sarbanes-Oxley Rule 2002 is American legislation (U.S. law). The Congress was introduced on 30 July this year to help defend taxpayers from fake corporate accounts. Strict amendments have been imposed and additional sanctions have been imposed on the breakers, it is also known as the 2002 SOX Act and the 2002 Corporate Responsibility Act.

Step-by-step explanation

As per the given case study, on the first day of Alice's career, she noted that JCI receivables for Business X amounted to $10,000.00 for two years. She knew Company X was a start-up company and was ready to start again as Xavier, the company owner, was her favorite uncle. Alice provided an accounting statement during the second week on the job, revealing that Business X paid its JCI account in full. JCI applied to Bank Generous for $1,000,000.00 after Alice developed its 3 accounting statements. Bank Generous used Alice's financial statement to accept the JCI loan. Their clearance was based on $10,000.00 off amounts. The president of the Bank told JCI managers that it hardly met the loan requirements. They also claimed they would not apply for the loan if their figures had been off by as much as $100.

According to the law of The Sarbanes-Oxley (SOX), Alice was hired for general accounting and Accounts receivable in JCI and she violated the SOX act. As per her financial statement, she granted company X a loan of $10,000 on behalf of the JCI. Yes, Alice did violate the SOX as Company X's owner was his uncle and she granted the loan out of personal reasons and not professional which was an unethical code of conduct by an employee which is against the policy of  SOX. 

The Sarbanes-Oxley Act:

Sarbanes-Oxley Rule 2002 is a US law. On July 30 of that year, Congress was enacted to help protect taxpayers from false corporate financial statements. It is often known as the SOX Act 2002 and the Corporate Responsibility Act  2002, stringent changes have been mandatory, and stern new punishments have been levied on the breakers.

In reaction to the financial scandal early in the 2000s, publicly-traded corporations including Enron Corp., Tyco International plc, and WorldCom were included in the Sarbanes-Oxley rule. The high-profile fraudulent misconduct rattled investors' trust and prompted many to call for a review of decades-old regulatory rules.

In reaction to a wider public corporate financial crisis earlier in the Decade, the 2002 Sarbanes-Oxley (SOX) Act came into effect. This Act also established stringent new guidelines and enforced tougher recordkeeping standards on accountants, auditors, and corporate authorities and this act has imposed additional criminal restrictions for security breaches.

The Sarbanes-Oxley Act 2002 regulations and regulatory policies updated or revised current security protection legislation such as the Stock Exchange Act of 1934 and other laws enacted by the Securities and Exchange Commission (SEC). In four major regions, the current legislation allows for changes and supplementary measures:

-Corporate liabilities

-Increased criminal penalty

-Control on accounts

-Fresh protective measures

Sarbanes-Oxley (SOX) Main provisions of the 2002 Act

A complicated and comprehensive act of legislation is SOX 2002. Section 302 and Section 404 and Section 802 which are common to three of the main sections.

Section302 of the 2002 SOX Act allows senior business executives to confirm that the financial statements of the corporation shall comply with SEC disclosure requirements and are fairly present in both the operating and financial content dimensions of the issuer.

Section 404 of the 2002 SOX Act lays out internal monitoring and monitoring procedures to ensure the appropriateness of these measures by the management and auditors. Any law critiques have complained that Section 404 provisions may have a detrimental effect on publicly traded firms, as the development and management of the required internal controls are always costly.

The three rules affecting record keeping are laid down in section 802 of the 2002 SOX Act. The first involves document loss and counterfeiting. The second determines specifically the preservation time for record collection. The third rule defines unique company documents which businesses must store, including the electronic correspondence.

The 2002 SOX Act specifies the criteria for electronic reports for divisions of information technology (IT) as well as the financial side of an organization such as assessments, accuracy, and controls. In this sense, the Act does not carry out a range of corporate standards but rather specifies the company documents should be kept in a file and for how long. It is not clear how a firm can store its documents in the requirements set out in the SOX Act of 2002 that it is the duty of the IT department to store them.