The Sarbanes–Oxley Act of 2002 (passed on 30 July 2002) is a federal law of United States that has established new and improved regulations for all the US companies in reaction to the growing financial statement frauds, which resulted in huge losses to investors. So it was an attempt by US congress to reinforce corporate governance and restore the faith of the investors in the US financial reporting system. It made extensive changes in the freedom and productiveness of the auditors and the various auditing committee’s, the duties of the management and in the financial disclosures of the company.
SOX is also known by various different names like Public Company Accounting Reform and Investor Protection Act and Corporate and Auditing Accountability and Responsibility Act.
The Act also established a government organization known as Public Company Accounting Oversight Board that supervised auditors. It required that financial officers to accredit the various financial reports have been reviewed and does not include any false information and true representation of the companies’ financial health and performance. Placing additional duties on management and the auditors so that they make sure the presence of sufficient internal control systems that gives adequate guarantee about the financial statements being complete and accurate. Management had to file an annual report a which had to be attested and reported by an external auditor about the management’s evaluation of internal control in the company Public firm must comprised of unbiased members of board of directors, which have to validate the accuracy of financial statements.
Nortel’s compliance with SOX
Nortel did not conform to guidelines of SOX, which was evident when the independent auditors found the misrepresentation of various figures and frauds in the financial statements. The main reason behind the review was to find the main cause of these frauds and the ways these to...
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