Sarbanes-Oxley Act 2002
Sarbanes-Oxley Act 2002
The Sarbanes-Oxley Act is named after two Senators who were considered the architects of the act and setting into motion the deadlines for compliance with it. These Senators were Paul Sarbanes and Michael Oxley. The Sarbanes-Oxley Act was brought into force in 2002 to help regulate financial practices of corporations. This was mostly due to the actions of Enron and WorldCom scandals. The management of these corporations was not being truthful with the public about the handling of the finances of the companies while taking large bonuses for themselves. The use of the Sarbanes-Oxley Act, no matter how large or small your organization is, must be followed. The Act is broken down into eleven separate sections. There are a few sections that are considered more important than others. Those sections include sections 302, 401, 404, 409, 802, and 906. Section 302 of the Act includes responsibility for financial reports. It states that financial reports need to include certifications that have signatures of officers that have reviewed the reports; the reports may not contain any statements that are not true or contain anything that could be misleading (Sarbanes-Oxley Act 2002, 2006). Section 401 of the Act deals with Disclosing Periodic Reports. Any financial statements that are issued by a company must be accurate and disclosed in a fashion that does not mislead the public or shareholders. Any financial statement that is issued should include any obligations, transactions and liabilities. Section 404 of the Act deals with the Assessing Internal Controls of the corporation. Corporations are to release reports that deal with the internal control structure and procedure for their financial reporting. This type of statement will help to assess how effect their internal controls and procedures are operating. Section 409 deals with Real Time Disclosures. Corporations are required to issue to the public on a regular basis, information on certain changes in their business, such as operation changes or financial issues. Any of these disclosures are to be disclosed in ways that the public will be able to understand. Section 802 deals with the Penalties for Altering Documents. In this section, it explains what can happen if a person alters, conceals, falsifies records, documents, conceals, or destroys records with the intention of obstructing or impeding an investigation. These penalties or fines can include up to at least 20 years in prison. Any accountant that willingly does not follow the proper maintenance of any and all audit practices for a set period of at least 5 years, will face penalties and/or fines of up to 10 years. Section 906 deals with the Corporate Responsibilities for Financial Reports. This section explains what is expected of the corporations in regards to reporting all financial dealings and being honest about them. It is stated that when a financial report is submitted, it needs to be accompanied by statements of both the chief financial officer and the CEO of the corporation. It is also stated in this section what can happen to the people that do not follow the rules. These penalties or fines can include a fine up to $1,000,000 or a prison term of at least 10 years or both. In addition, anyone that signs the statement and knows that it is not true will face a more severe penalty of up to $5,000,000 and 20 years in prison or both. When President Bush signed into law the SOX, he stated that SOX was “the most far reaching reforms of American business practices since the time of Franklin Delano Roosevelt." (Sarbanes Oxley Compliance Professionals Association (SOXCPA )n.d.). After President Bush signed SOX and it became law, it put into force certain things that would enhance the responsibility of corporations, help to enhance the responsibility of all financial disclosures, and help stop corporate and accounting fraud. It...
References: A Guide To The Sarbanes-Oxley Act 2002. (2006). Retrieved from
Sarbanes Oxley Compliance Professionals Association (SOXCPA). (n.d.). Sarbanes Oxley Section 906. Retrieved from http://www.sarbanes-oxley-act.biz/SarbanesOxleySection906.htm
U.S.Securities and Exchange Commission. (n.d.). Retrieved from http:// http://www.sec.gov/about/laws.shtml
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