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    Assignment On Sarbanes Oaxley Act 9

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    Haris Munir
    The Sarbanes-Oxley Act of 2002 (SOX) was passed to protect investors from corporate accounting fraud and establish new standards for public company boards and management. SOX aims to boost confidence in financial reporting by requiring companies to assess and report on their internal controls. Key provisions include certifying financial reports, accurately representing financial health, disclosing major changes promptly, and outlining criminal penalties for destroying evidence or knowingly falsifying statements. While SOX increases responsibility and reduces potential for fraud, it does not eliminate all risk as loopholes may be found.

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    Assignment On Sarbanes Oaxley Act 9

    Uploaded by

    Haris Munir
    56 views3 pages
    The Sarbanes-Oxley Act of 2002 (SOX) was passed to protect investors from corporate accounting fraud and establish new standards for public company boards and management. SOX aims to boost confidence in financial reporting by requiring companies to assess and report on their internal controls. Key provisions include certifying financial reports, accurately representing financial health, disclosing major changes promptly, and outlining criminal penalties for destroying evidence or knowingly falsifying statements. While SOX increases responsibility and reduces potential for fraud, it does not eliminate all risk as loopholes may be found.

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    Assignment on Sarbanes Oaxley Act 9

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    The Sarbanes-Oxley Act of 2002 (SOX) was passed to protect investors from corporate accounting fraud and establish new standards for public company boards and management. SOX aims to boost confidence in financial reporting by requiring companies to assess and report on their internal controls. Key provisions include certifying financial reports, accurately representing financial health, disclosing major changes promptly, and outlining criminal penalties for destroying evidence or knowingly falsifying statements. While SOX increases responsibility and reduces potential for fraud, it does not eliminate all risk as loopholes may be found.

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    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    56 views3 pages

    Assignment On Sarbanes Oaxley Act 9

    Uploaded by

    Haris Munir
    The Sarbanes-Oxley Act of 2002 (SOX) was passed to protect investors from corporate accounting fraud and establish new standards for public company boards and management. SOX aims to boost confidence in financial reporting by requiring companies to assess and report on their internal controls. Key provisions include certifying financial reports, accurately representing financial health, disclosing major changes promptly, and outlining criminal penalties for destroying evidence or knowingly falsifying statements. While SOX increases responsibility and reduces potential for fraud, it does not eliminate all risk as loopholes may be found.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 3

    SARBANES OXLEY ACT 2002

    What is Sarbanes Oxley Act?

    The Sarbanes Oxley act is a U.S. federal law that aims to protect investors by
    making corporate disclosures more reliable and accurate. The act was passed because of major
    scandal in the United State.as Enron and WorldCom, which tricked investor and inflated stock
    prices. This act was sponsored by US Senator Paul Sarbanes and Representatives Michel Oxley
    and signed by President George W. Bush on July 30, 2002. This act establishes new and
    enhanced standards for all US public company boards, management and public accounting firms.

    Purposes:

     To stop scams
     To protect investors
     Review legislative Audit requirement
     Boost public confidence in accounting system

    Applicability:

     Applicable on all listed companies


     On international companies whose equity, debt registered in SEC.
     Not applicable on private companies

    Major provisions:

    The Sarbanes Oxley act consist of eleven sections in which section 302,401, 404,
    409 and 802 are very important.

    Section 302:

    Financial reports and statements must certify that:

     The documents have been reviewed by signing officers and passed internal controls
    within the last 90 days.

    1
     The documents are free of untrue statements or misleading omissions.
     The documents truthfully represent the company’s financial health and position.
     The documents must be accompanied by a list of all deficiencies or changes in internal
    controls and information on any fraud involving company employees.
    Section 401

    Financial statements are required to be accurate. Financial statements should also represent any
    off-balance liabilities, transactions, or obligations. 

    Section 404

    Companies must publish a detailed statement in their annual reports explaining the structure of
    internal controls used. The information must also be made available regarding the procedures
    used for financial reporting. The statement should also assess the effectiveness of the internal
    controls and reporting procedures.

    The accounting firm auditing the statements must also assess the internal controls and reporting
    procedures as part of the audit process.

    Section 409

    Companies are required to urgently disclose drastic changes in their financial position or
    operations, including acquisitions, divestments, and major personnel departures. The changes are
    to be presented in clear, unambiguous terms.

    Section 802

    Section 802 outlines the following penalties:

     Any company official found guilty of concealing, destroying, or altering documents, with
    the intent to disrupt an investigation, could face up to 20 years in prison and applicable
    fines.

    2
     Any accountant who knowingly aids company officials in destroying, altering, or
    falsifying financial statements could face up to 10 years in prison.

    Conclusion:

    In conclusion, the establishment of the SOX Act makes corporations liable for accurate and up to
    date reporting of financial data. To evaluate the effectiveness of SOX in preventing future frauds,
    one must take into consideration the many different situations in which the legislation is
    applicable. Enactment of the Sarbanes-Oxley Act increases corporate responsibility and sets
    restrictions on auditing services. The SOX Act reduces the potential for fraud; however, it does
    not eliminate it. From a business perspective, compliance is beneficial. The cost of implementing
    SOX requirements are high, but the benefit of increased investor confidence is higher. There are
    going to be some situations where fraud is inevitable. Fraudulent wrongdoers and companies will
    find loopholes and recent Court of Appeals cases are evidence of that. As with any law, this
    regulation will reduce the frequency but not completely prevent future criminal activity.

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