Accounting and Auditing Enforcement Courtney D. Moore ACC 599 Graduate Accounting Capstone Professor David Humphreys July 26, 2015

Accounting and Auditing Enforcement Courtney D. Moore ACC 599 Graduate Accounting Capstone Professor David Humphreys July 26, 2015 Sarbanes-Oxley Act of 2002 (SOX) actually only applies to publically traded companies. However, the scrutiny that nonprofit health organizations live under due to the nature of their business and tax-exempt status, likely leads the public to require that non-profit companies adhere to the same if not greater standards. SOX requires various standards be met in order to protect investors as well as increase corporate oversight of for profit health care organizations. Non-profit health care organizations tend to adhere to the same regulations. SOX requires that these companies adhere to many regulations. Amongst these regulations are the requirements that main executives and financial officers of publically traded companies must sign and certify annual and quarterly financial statements, as well as that all companies audit committees must be comprised only of independent directors. Additionally, SOX lays out guidelines regarding internal control reporting, code of conduct and business ethics as well as programs for whistle blowers[Jon03]. If adhered to strictly, SOX provisions will prove to be helpful in the reduction of fraud and an increase in corporate responsibility for both profit and non-profit healthcare organizations. The provisions of SOX seek to create an ethical work space in which employees at all levels are held to a high standards in their business practices. If followed properly the regulations will create opportunities for effective audits that can detect any errors or fraud before it becomes a huge scandal. SOX also creates opportunities to increase the reliability and transparency of financial reports. The requirement of high ranking executives to personally sign vouching for the accuracy of financial reports will increase the corporate governance overall. If SOX requirement are made mandatory for non-profits healthcare firms the reduction of fraudulent activities is more than likely to occur. Accounting scandals in health care organizations will also be reduced. I am not completely sure that I find that SOX has been effective in regulating ethical behavior of for-profit health care organizations. I believe that it has the potential to reduce fraud because SOX requires the creation of a code of ethics which will set the tone for ethical behavior. Unfortunately SOX actually only requires that companies create and explain procedures for preventing fraudulent activities. Fraud is one of those things that cannot eradicated through legislation. Ever increasing advances in technology creates ever increasing opportunities for fraud. Author Tracy Coenen believes, "The legislation lacked the impact for which everyone was hoping. Instead of requiring companies to proactively prevent and detect fraud, the law really requires just detailed documentation of procedures"[Tra]. SOX mandates the creation of whistle blowing programs which encourages employees to disclose and report any unethical and fraudulent behavior witnessed or experienced in these companies without the fear of retaliation or termination. This mandate has potential to expose fraudulent activity. Effective implementation of SOX requirement for-profit healthcare companies is able to help companies resolve conflicts of interest in the healthcare organization as well as increase the likelihood of accurate financial reporting. According to Pozgar (2009), SOX rules implementation has helped for-profit healthcare organizations in reducing unethical practices in the areas of billing fraud and inappropriate advertising and marketing