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    The Sarbanes-Oxley Act of 2002 was passed in response to major corporate and accounting scandals to protect investors by improving corporate governance and financial disclosures. It established new or enhanced standards for all U.S. public company boards, management, and public accounting firms. Key provisions require certification of financial reports, assessment of internal controls, and criminal penalties for fraudulent behavior. The Act also protects whistleblowers and aligns business ethics and strategic management with greater transparency and accountability.

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    Ass 2

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    The Sarbanes-Oxley Act of 2002 was passed in response to major corporate and accounting scandals to protect investors by improving corporate governance and financial disclosures. It established new or enhanced standards for all U.S. public company boards, management, and public accounting firms. Key provisions require certification of financial reports, assessment of internal controls, and criminal penalties for fraudulent behavior. The Act also protects whistleblowers and aligns business ethics and strategic management with greater transparency and accountability.

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    The Sarbanes-Oxley Act of 2002 was passed in response to major corporate and accounting scandals to protect investors by improving corporate governance and financial disclosures. It established new or enhanced standards for all U.S. public company boards, management, and public accounting firms. Key provisions require certification of financial reports, assessment of internal controls, and criminal penalties for fraudulent behavior. The Act also protects whistleblowers and aligns business ethics and strategic management with greater transparency and accountability.

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    59 views5 pages

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    albert cumabig
    The Sarbanes-Oxley Act of 2002 was passed in response to major corporate and accounting scandals to protect investors by improving corporate governance and financial disclosures. It established new or enhanced standards for all U.S. public company boards, management, and public accounting firms. Key provisions require certification of financial reports, assessment of internal controls, and criminal penalties for fraudulent behavior. The Act also protects whistleblowers and aligns business ethics and strategic management with greater transparency and accountability.

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    of 5

    1. What is Sarbanes Oxley Act?

    The U.S. has a statute known as the Sarbanes-Oxley Act of 2002. On July
    30 of that year, Congress passed laws to assist shield investors from businesses
    that provided false financial information. Its official name is the SOX Act of 2002,
    and it demanded substantial updates to current securities laws as well as severe
    extra punishments for violators. Financial scandals involving publicly listed
    businesses including Enron Corporation, Tyco International plc, and WorldCom
    in the early 2000s led to the creation of the Sarbanes-Oxley Act in 2002. The
    well-publicized scams undermined investor faith in the reliability of company
    financial statements, which caused many to call for a revision of the regulations'
    long-standing requirements.

    The Securities Exchange Act of 1934 and other laws implemented by the
    Securities and Exchange Commission, as well as the regulations and
    enforcement methods detailed in the Sarbanes-Oxley Act of 2002, altered or
    enhanced already-existing laws governing the regulation of securities (SEC). The
    new legislation included changes and improvements in four key areas, including
    corporate accountability, heavier penalties for crimes, accounting regulation, and
    new protections.

    The primary goals of the Act were to control internal audits, financial
    reporting, and other business processes at publicly listed corporations. All
    businesses, even for-profit and private businesses, must abide by certain
    restrictions, nevertheless. The Act also included penalties for failing to follow its
    rules. Corporate governance and financial disclosure are important aspects of
    Act compliance.

    2. What does the Sarbanes-Oxley Act require companies to do?

    All financial reports must contain an Internal Controls Report in


    accordance with the Sarbanes Oxley Act. This demonstrates that a corporation
    has correct financial data and that there are sufficient procedures in place to
    protect that data. It is also necessary to submit year-end financial disclosure
    filings. When conducting a Section 404 audit, a SOX auditor must evaluate
    controls, policies, and processes. Internal policies and processes must be able to
    be audited using a control framework like COBIT in order to pass a SOX audit.
    The ISACA COBIT framework was developed to fill the critical gap between
    technological challenges, business risks, and control needs. The quality, control,
    and dependability of information systems may be ensured by implementing
    COBIT in any firm from any sector. An audit record of every access and action to
    sensitive corporate information must be provided via log collecting and
    monitoring systems.

    By safeguarding workers of publicly listed businesses or their subsidiaries


    who disclose unlawful activity, Sarbanes-Oxley also promotes the revelation of
    corporate fraud. The U.S. is permitted to do so under Section 806 of the
    Sarbanes Oxley Act. The Department of Justice is also given permission to bring
    criminal charges against people who are responsible for the retaliation. The
    Department of Labor is required to safeguard whistleblower allegations involving
    employers that engage in retaliation.

    3. What are the main provisions of the Sarbanes-Oxley Act?

    Section numbers are used to categorize the Sarbanes-Oxley Act's


    provisions:

    Section 302: Public corporations are required to submit periodic reports to


    the Security and Exchange Commission. The information in these reports must
    be individually verified to by top management, who are also in charge of creating
    internal data controls.

    Section 404: A section on internal control system must be included in the


    annual financial reports to examine overall performance and to disclose any
    flaws that are found. The evaluation of the internal controls by administration
    must be supported by certified external auditors.
    Section 409 states that the public must be informed right once of any
    significant changes to the company's activities or financial standing.

    The laws governing punishments are found in Sections 802 and 906. They
    prohibit changing documents in an effort to obstruct an inquiry and restrict
    anybody from certifying a false or fraudulent financial report. We'll go into more
    depth about these provisions later in the essay.

    The 404 is regarded as the most difficult and complicated of these


    portions. Increasing technological systems must not only be installed to ensure
    data security and integrity, but also corporate management and independent
    auditors must periodically evaluate and record the effectiveness of such systems.

    4. How it affects the US businesses until today?

    The Sarbanes-Oxley Act of 2002 was hastily approved by Congress with


    the goals of reducing fraud, enhancing the accuracy of financial reporting, and
    regaining the trust of investors. Numerous businesses in the United States have
    started to standardize and consolidate important financial activities (typically in
    shared service centers), get rid of duplicate information management, connect
    various platforms, decrease data definition errors, automating manual tasks,
    lessen transmissions, better integrate distant offices, better integrate
    transactions, more quickly train workers, expand responsibilities for controls, and
    get rid of unneeded control system. Additionally, SOX-inspired practices are
    starting to be used as a model for observing other legal requirements. The
    company focuses on control environment because they believe that it will help
    the company to ensure their company defence because for them controls
    themselves are the second and third lines of defense, not the first. Some CEOs
    believe that they must connect every decision to the bottom line.

    Personally business owners are also impacted by a few Sarbanes-Oxley


    regulations. For instance, there are fines and up to 20 years in jail for willfully
    deleting, changing, or forging documents with the aim to hinder or influence a
    federal agency inquiry or a federal bankruptcy action. Whistleblower protection
    also applies, and it is illegal to retaliate against someone who gives a law
    enforcement official information about a potential federal crime. This infraction
    carries a maximum 10-year jail sentence.

    5. How it is related to business ethics/code of ethics.

    To safeguard shareholders, discourage corporate fraud, and stop


    misbehavior, including retribution against whistleblowers, SOX was implemented in
    the wake of corporate malfeasance by big publicly traded businesses. Generally
    speaking, organizations covered by SOX's most well-known provisions, such as its
    financial reporting requirements, are also registered under the Securities Exchange
    Act of 1934 as issuers of securities. A code of ethics is a set of written principles that
    are ostensibly intended to prevent misconduct and advance they have ethical
    behavior, includes resolving conflicts of interest between personal and professional
    ties that are real or perceived, complete, fair, accurate, timely, and intelligible
    disclosure in periodic reports that the covered company is obligated to file, obeying
    all applicable laws, rules, and regulations and responsible for following the code.

    6. Explain its connection to strategic management.

    Setting policies, processes, and goals in order to increase a company's or


    organization's competitiveness is the process of strategic management. Change
    is a constant in business, thus in order to satisfy customers, the company must
    adapt to the changing environment. The Sarbanes-Oxley Act also enables
    businesses to identify opportunities for operational development. In order to
    avoid the Sarbanes-Oxley Act's negative effects on both small and large
    organizations, corporations are also required to implement it. The SOX's Section
    404 establishes a framework for routine evaluations of internal control over
    financial reporting and requires public accounting firms doing the audits to review
    the report on the evaluation. The Sarbanes-Oxley act and strategic management
    are important because it provides greater oversight for corporations.
    REFERENCES

    Wagner, S. Dittmar, L. (2006). The Unexpected Benefits of Sarbanes-Oxley. Retrieved from.


    https://hbr.org/2006/04/the-unexpected-benefits-of-sarbanes-oxley

    Kenton, W. (2022). Sarbanes-Oxley Act: What It Does to Protect Investors. Retrieved from.
    https://www.investopedia.com/terms/s/sarbanesoxleyact.asp

     Fruhlinger, J. (2020). The Sarbanes-Oxley Act explained: Definition, purpose, and provisions.
    Retrieved from.
    https://www.csoonline.com/article/3598292/the-sarbanes-oxley-act-explained-definition-purpose-and-
    provisions.html

    Cino, R. (2005). All Employers Should Consider the Impact of the Sarbanes-Oxley Act on Corporate
    Compliance and Ethics Programs. Retrieved from.
    https://www.jacksonlewis.com/resources-publication/all-employers-should-consider-impact-sarbanes-
    oxley-act-corporate-compliance-and-ethics-programs

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