Sarbanes-Oxley Act of 2002
Sarbanes-Oxley Act was drafted by Senator Paul Sarbanes and Representative Michael Oxley and was signed into law by President George W. Bush on July 30, 2002. The Sarbanes-Oxley Act is arranged in eleven titles, compliance in hand it is focused on sections; 302, 401, 404, 409, 802, and 906. The Sarbanes-Oxley Act was the outcome of the aftermath of the Enron, Tyco, and WorldCom scandals. The Sarbanes-Oxley Act (SOX), was to prevent corporations and their executives from willingly misleading the public of their financial health. The SOX Act was intended to protect investors by increasing the accuracy and reliability of corporate disclosures. SOX created new standards for corporate accountability. The SOX Act also changes the way how executives interact with each other and with internal auditors. This allows for a legal barrier between executives and the internal auditor and decreases any conflict that could be made between the parties. “It removes the defense of "I wasn't aware of financial issues" from Chief Executive Officers (CEOs) and Chief Financial Officers (CFOs) (SOX-Online). The act applies to all public companies in the United States and international companies that have registered with the Security and Exchange Commission and the audit firms they have hired as external auditors. This act was to enhance corporate governance and increase the corporate accountability. This is done by formalizing internal checks and balances and increasing separation of duties by creating new levels of control. It also ensures that financial reporting shows full disclosure, and that corporate governance has complete transparency. The SOX Act also enhances the audit procedure for public corporations and how internal controls are managed. The SOX Act requires all financial reports to include an internal control report. Internal controls are important part of the SOX Act; the internal controls are the corporation’s...
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