Sarbanes-Oxley Act of 2002
BUS591 Financial Accounting
Xx xxxxx xxxxxOctober 27, 2014
Sarbanes-Oxley Act of 2002
In 2002, Congress passed the Sarbanes-Oxley Act (SOX) to reduce unethical corporate behavior and decrease the likelihood of future corporate scandals (Kimmel, Weygandt, & Kieso, 2013). As a result of SOX, top management must confirm the accuracy of financial information. In addition, severe penalties are assessed for fraudulent financial activity. Kimmel, Weygandt, and Kieso (2013) stated “SOX increased the independence of the outside auditors who review the accuracy of corporate financial statements, and increased the oversight role of boards of directors” (“Ethics in Financial Reporting”, para 2). Hanna (2014) stated “SOX intent was to improve corporate governance and restore the faith of investors” (para 2). The SOX enacted new levels of transparency and examination of a public company’s books. Key Components
Public companies face the task of assuring their financial reporting is compliant with SOX. A company’s audit department requests a comprehensive audit by SOX certified accountants to help identify the company’s risks. Next, financial software is installed to produce the audit trails that are required for SOX compliance. Certification and certain public actions are required for a company to remain SOX compliant (“Sarbanes-Oxley Summary”, para 1). A few sections of SOX are the most important. Section 302
“Sarbanes-Oxley Summary of Major Sections” (2014) stated “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” (“Section 302: Corporate Responsibility for Financial Reports” , para 1). Section 302 assures the following: The signing officer has reviewed the financial report.
The reports do not include false statements or omit statements to make the...
References: Anderson, Mark. (2012). Sarbanes-Oxlet still raises ire, but it has fans, too. Sacramento Business Journal. Retrieved from http://www.bizjournals.com/sacramento/print-edition/2012/01/20/sarbanes-oxley-raises-ire-but-has-fans.html?page=all
Eyden, T. (2012). Has SOX been successful? Accountingweb. Retrieved from http://www.accountingweb.com/article/has-sox-been-successful/219796
Hamel, W.W., Kelly, T.J., & Dolan, K.S. (2002). Life after Sarbanes-Oxley: They got tougher. Legal Times, 25(39), 1-2.
Hanna, J. (2014). The costs and benefits of Sarbanes-Oxley. Forbes. Retrieved from http://www.forbes.com/sites/hbsworkingknowledge/2014/03/10/the-costs-and-benefits-of-sarbanes-oxley/
Kimmel, P.D., Weygandt, J.J., & Kieso, D.E. (2013). Financial accounting: Tools for business decision making (7th ed.). ISBN: 9781118162286
Martin, J. A. & Combs, J. G. (2010). Sarbanes-Oxley: Does the Cost Knock Your Socks Off? Academy Of Management Perspectives, 24(3), 103-105. doi:10.5465/AMP.2010.52842957
Rehbein, K. (2010). Sarbanes-Oxley: Does It Help to Distinguish Good CFOs From Bad Ones? Academy Of Management Perspectives, 24(4), 90-92. doi:10.5465/AMP.2010.55206388
Sarbanes-Oxley summary of major sections. (2014). Retrieved October 27, 2014, from http://www.sarbanes-oxley-101.com/sarbanes-oxley-compliance.htm
Willits, S. D. & Nicholls, C. (2014). Is the Sarbanes-Oxley Act Working? CPA Journal, 84(4), 38-43.
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