Accounting for Chargebacks and the Sarbanes Oxley Act

The legal systems in many jurisdictions try juveniles differently from adults because juveniles do not have the same capacity to decide over right or wrong as adults. Eighteen is the standard age of adulthood. With the rising incidence of juvenile delinquency, some jurisdictions enacted laws to try juveniles, young people below 18, as adults. Trying minors as adults emerged as a solution to the rising crime rate among young people.

While trying minors as adults is legal, this is not an effective solution to juvenile delinquency. Harsh punishment for juvenile delinquents makes them hard-core criminals and encourages recidivism or progression in the crime committed. The solution to delinquency is prevention by engaging young people in worthwhile activities. Parole is also a reformative solution. Laws governing juvenile delinquency need evaluation for effectiveness.

The Sarbanes Oxley Act (Sox) was enacted in 2002 after a spate of accounting scandals involving huge companies like Enron and WorldCom led to the loss of thousands of jobs and billions of dollars of shareholder wealth. Aimed at restoring investor confidence the Sox introduced a number of laws that aimed to improve the internal controls of companies and made the CEOs and CFOs of companies criminally liable for breach of its provisions.

Among its many new requirements, the enactment of Sox also made it compulsory for all publicly traded companies to improve their accounting of trade and distributor chargebacks, which, until then, had remained in a state of neglect and apart from leading to misrepresentation of accounts, also caused significant monetary losses to distributors. This study explores the provisions of Sox, with particular reference to chargeback accounting, and the measures needed for compliance.