Corporate Responsibility Of The Sarbanes Oxley Act

The Sarbanes-Oxley is a U.S. federal law that has generated much controversy, and involved the response to the financial scandals of some large corporations such as Enron, Tyco International, WorldCom and Peregrine Systems. These scandals brought down the public confidence in auditing and accounting firms. The law is named after Senator Paul Sarbanes Democratic Party and GOP Congressman Michael G. Oxley. It was passed by large majorities in both Congress and the Senate and covers and sets new performance standards for boards of directors and managers of companies and accounting mechanisms of all publicly traded companies in America. It also introduces criminal liability for the board of directors and a requirement by

This act also sees Failure of corporate officers to certify financial reports as criminal offense.

I am not familiar with the law nor do I know if it is currently being used in my organization. Based on my research, Section 404 of the Sarbanes-Oxley Act requires public companies' annual reports to include the company's own assessment of internal control over financial reporting, and an auditor's attestation. Since the law was enacted, however, both requirements have been postponed for smaller public companies. Under the Sarbanes-Oxley Section 404, all public organizations are mandated to publish information in their annual reports in regards to the scope and adequacy of the internal control structure and procedures of their financial reporting. This information is then used to assess the efficiency in the internal control and procedures

In Section 906 criminal penalties for CEO and CFO false financial certification which certifies that a periodic report containing financial statements which fully complies with the requirements Sections 13(a) or 15(d) of the Exchange Act, as applicable; and the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the company for the periods being presented. The section can carry a fine of up to $5 million and up to 20 years imprisonment.

The Sarbanes-Oxley Act was a law created in 2002 to ensure that the boards of public companies oversee their companies in a more competent and transparent way in order to protect investors. Section 302 refers to the obligations of the corporate officers who sign the financial reports. The officers are responsible for verifying that the report is accurate and represents a true picture of the company’s financial condition. Section 401 states that The Commision must evaluate the financial reports. Section 404 covers the company’s internal control structure and the requirements of the accounting firm in assessing internal controls and reporting procedures. Section 409 requires a company to disclose information on changes to financial conditions or

The Sarbanes-Oxley Act was passes in 2002 in response to a handful of large corporate scandals that occurred between the years 2000 to 2002, resulting in the losses of billions of dollars by investors. Enron, Worldcom and Tyco are probably the most well known companies that were involved in these scandals, but there were a number of other companies guilty of such things as well. The Sarbanes-Oxley Act was passed as a way to crackdown on corporations by setting new and improved standards that all United States’ public companies and accounting firms were and are required to abide by. It also works to hold top level executives accountable for the company, and if fraudulent behaviors are discovered then the executives could find themselves in hot water. The punishments for such fraudulence could be as serious as 20 years jail time. (Sarbanes-Oxley Act, 2014). The primary motivation for the act was to prevent future scandals from happening, or at least, make it much more difficult for them to happen. The act was also passed largely to protect the people—the shareholders—from corporations, their executives, and their boards of directors. Critics tend to argue that the act is to complicated, and costs to much to abide by, leading to the United States losing its “competitive edge” in the global marketplace (Sarbanes-Oxley Act, 2014). The Sarbanes-Oxley act, like most things, has its pros and cons. It is costly; studies have shown that this act has cost companies millions of

The U.S. Congress passed the Sarbanes-Oxley Act in 2002 due to scandals like Enron, Worldcom, and Tyco in early 2000. This Act was to serve as protection for investors from corporate malpractice and to encourage employees to report misdeeds when discovered. This Act was placed into law to protect investors against scandals like these in the future. Each of the top executives of these organizations played extensive roles in the extortion of funds that left the investors and shareholders without any recourse.

The first one is the Sarbanes-Oxley section 302, which is found under Title III of the act, pertaining 'Corporate Responsibility for Financial Reports'.

Sarbanes-Oxley Act contains 11 titles, they provide specific guidelines and regulations for financial reporting. The titles are: Public Company Accounting Oversight Board (PCAOB), Auditor Independence, Corporate Responsibility, Enhanced Financial Disclosures, Analyst Conflict of Interest, Commission Resources and Authority, Studies and Reports, Corporate and Criminal Fraud Accountability, White Collar Crime Penalty Enhancement, Corporate Tax Returns and Corporate Fraud Accountability. In the introduction of the act, it states that it is an act “to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes”. (Sarbanes-Oxley Act, 2002)

It has been over a decade since these regulatory tools took effect. Even though they helped to reveal fraud and unethical behaviors within organizations, it seems like there are still issues and things that need to be worked on. One of the negative aspects of Sarbanes-Oxley Act is that companies incurred significant costs to comply with its requirements. (Lawrence, 2013) A lot of companies believed that there were more costs than benefits from these implementations.

Congress in 2002. This SOX act propones to defend financiers from fraudulent bookkeeping activities. The Act directed modifications to influence corporations’ financial disclosure and other accounting fraud. Actually, The SOX Act was created in response to “accounting malpractice in the early 2000s, when public scandals such as Enron Corporation, Tyco International plc, and WorldCom shook investor confidence in financial statements and demanded an overhaul of regulatory standards” (Investopedia, 2017). The act rules and policies affected the legislation related to security regulations. The Sarbanes-Oxley Act Section 302 and Section 404 are the main points. The rules and enforcement policies outlined by the SOX Act amend or supplement existing legislation dealing with security regulations. The two key provisions of Section 302 is a mandate that requires senior management to certify the accuracy of the reported financial statement. Section 404 is a requirement that management and auditors establish internal controls and reporting methods on the adequacy of those controls. Section 404 has very costly implications for publicly traded companies as it is expensive to establish and maintain the required internal controls (Investopedia,

In section 206, “The CEO, Controller, CFO, Chief Accounting Officer or person in an equivalent position cannot have been employed by the company's audit firm during the 1-year period preceding the audit”. This section aim to reduce the chance of manipulation by high position of accounting firms and make sure accounting firms’

Section 302 defines the corporate responsibility for financial reports. This section is intended to safeguard against faulty financial reporting. As part of this section, companies must safeguard their data to ensure financial reports are not based upon faulty data or data that has been tampered with.

The Sarbanes-Oxley Act (SOX) was enacted in July 30, 2002, by Congress to protect shareholders and the general public from fraudulent corporate practices and accounting errors and to maintain auditor independence.   In protecting the shareholders and the general public the SOX Act is intended to improve the transparency of the financial reporting.   Financial reports are to be certified by the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) creating increased responsibility and independence with auditing by independent audit firms. In discussing the SOX Act, we will focus on how this act affects the CEOs; CFOs; outside independent audit firms; the advantages and a

Section 404 requires public companies to establish internal controls and report annually on their effectiveness over financial reporting. The CFO and CEO are held personally responsible for the internal controls via the requirement to sign a statement certifying the adequacy of the internal control system (Moffett and Grant, 2011, p. 3). Additionally, the company’s independent auditor must issue an attestation regarding management’s assessment of the internal structure as part of the company’s annual report (Bloch, 2003, p. 68).