Key Implications of Sarbanes-Oxley Act(SOX) For Corporate Accounting and Financial Disclosure Information
the Corporate Scandal like Enron, Tyco and Worldcom in USA in the early of this decade. The scandal costs billions of dollars of investors’ money and simultaneous slump of share market.
The law was named after Senator Paul Sarbanes(D-MD) and Michael G. Oxley (R-OH). The law has 11 sections that cover from corporate responsibilities to criminal penalties. It requires Securities and Exchange commission ruling for implementation.
The key areas of 11 sections of the corporate act are:
- Public Company Accounting Oversight Board: They conduct the Audit for Public Accounting Firms.
- Auditor Independence: It establishes the standard to provide Auditor’s independence in order to avoid any conflict.
- Corporate Responsibilities: This section defines the interaction of external auditors and corporate audit committees, and outlines the responsibility of corporate officers for the accuracy and validity of corporate financial reports.
- Enhanced Financial disclosure: It explains enhanced reporting requirements for financial transactions, including off-balance-sheet transactions, pro-forma figures and stock transactions of corporate officers.
- Analyst Conflict of Interest: This section provides measures to restore investor confidence in the reporting of securities analysts.
- Commission Resources and Authorities: It has four sections that defines ways to restore investors’ confidence in Security Analysis.
- Studies and Reports: This section provides actions against violations by the SEC registrants (companies) and auditors.
- Corporate and Criminal Fraud Accountability: This section outlines criminal penalties for fraud due to manipulation, destruction or alteration of financial records.
- White Collar Crime Penalty: It incorporates criminal penalties for white collar crime.
- Corporate Tax Returns: This section consists the clause that Chief Executive Officer should sign the tax return.
- Corporate Fraud Accountability: It identifies that tampering corporate fraud and records is criminal offenses and associated penalty with it.
Filed under Corporate Law | Tags: Corporate Scandal, Corporate Tax, Criminal, Criminal Fraud, Fraud, Securities and Exchange Commission, SOX | Comment Below
“Finance and accounting organizations have been pushed to the background recently as IT and supply chain have been driving where companies are going,” says one disgruntled CIO. “Sarbanes-Oxley is the revenge of the bean counters. It’s a wedge for the accounting profession to get control of the business again.”