The Sarbanes-Oxley Act
The Sarbanes-Oxley Act The Sarbanes-Oxley act was enacted in 2002 following corporate financial scandals like those involving Enron and WorldCom. The act was created in order to combat corporate accounting fraud and enhance the quality of corporate financial disclosures. To accomplish this, the act created the "Public Company Accounting Oversight Board", or PCAOB to oversee audits and compliance.
History of the Act The Sarbanes-Oxley act arose as a result of several corporate accounting scandals that became public in late 2001 and early 2002. These scandals involved many publicly traded companies such as Enron, which “boosted profits and hid debts totaling over $1 billion by improperly using off-the-books partnerships”; WorldCom, which “overstated …show more content…
Bush signed into law the Sarbanes Oxley Act, calling it “the most far reaching reforms of American business practices since the time of Franklin Delano Roosevelt” (Securities Exchange Commission, 2013). The act was named after its sponsors: Banking Committee Chairman Paul Sarbanes and Congressman Michael G. Oxley and was signed into law after a 97-to-0 vote by the Senate (The Sarbanes-Oxley Act, 2016). The purpose of the Sarbanes-Oxley Act, as stated on the act, is “to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.” Today, despite many different opinions about its practicality and necessity, the Sarbanes-Oxley act continues to be an important regulation in regards to corporate financial disclosures and …show more content…
Those sections include: section 302 which deals with corporate responsibility for financial reports, section 404 which deals with management’s assessment of internal controls, section 409 which deals with real-time issuer disclosures, section 902 which deals with attempts and conspiracies to commit fraud, and section 906 which deals with criminal penalties for certifying a falsified or misleading financial report. “The essence of Section 302 of the Sarbanes-Oxley Act states that the CEO and CFO are directly responsible for the accuracy, documentation and submission of all financial reports as well as the internal control structure to the SEC” (Sarbanes-Oxley 101, 2011). This means that the CEO and the CFO must sign financial reports confirming that they have read the report, that the information contained in the report is true and not misleading (which includes omitting pertinent information) , and that the financial statements and information in the report accurately reflect the financial condition of the
History of the Act The Sarbanes-Oxley act arose as a result of several corporate accounting scandals that became public in late 2001 and early 2002. These scandals involved many publicly traded companies such as Enron, which “boosted profits and hid debts totaling over $1 billion by improperly using off-the-books partnerships”; WorldCom, which “overstated …show more content…
Bush signed into law the Sarbanes Oxley Act, calling it “the most far reaching reforms of American business practices since the time of Franklin Delano Roosevelt” (Securities Exchange Commission, 2013). The act was named after its sponsors: Banking Committee Chairman Paul Sarbanes and Congressman Michael G. Oxley and was signed into law after a 97-to-0 vote by the Senate (The Sarbanes-Oxley Act, 2016). The purpose of the Sarbanes-Oxley Act, as stated on the act, is “to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.” Today, despite many different opinions about its practicality and necessity, the Sarbanes-Oxley act continues to be an important regulation in regards to corporate financial disclosures and …show more content…
Those sections include: section 302 which deals with corporate responsibility for financial reports, section 404 which deals with management’s assessment of internal controls, section 409 which deals with real-time issuer disclosures, section 902 which deals with attempts and conspiracies to commit fraud, and section 906 which deals with criminal penalties for certifying a falsified or misleading financial report. “The essence of Section 302 of the Sarbanes-Oxley Act states that the CEO and CFO are directly responsible for the accuracy, documentation and submission of all financial reports as well as the internal control structure to the SEC” (Sarbanes-Oxley 101, 2011). This means that the CEO and the CFO must sign financial reports confirming that they have read the report, that the information contained in the report is true and not misleading (which includes omitting pertinent information) , and that the financial statements and information in the report accurately reflect the financial condition of the