The Importance And The Use Of Sarbanes Oxley 2002 Act.
Sarbanes Oxley 2002 was a major decision regarding the practice of corporate financial policies which is regarded as an 2002 act of investor protection. Sarbanes-Oxley Act of 2002 was signed by the federal law of the United States on July 30, 2002 which laid down 11 points which became the cardinal tenets for the private and public corporate who included legal responsibilities and penalties for the defaulters in order to cut the increasing scandals in the corporate world. The act came into action because of the occurrence of major accounting and business scandals which already affected big industries such as Enron, Peregrine Systems, WorldCom and Tyco International.
Sarbanes Oxley 2002 is named after Paul Sarbanes, the US Senator and Michael Oxley, the US Representative which was passed in the parliament and signed by US President George Bush. Under this law the companies are obliged under the Securities and Exchange Commission and PCAOB or Public Company Accounting Oversight Board which will regulate all the policies of the corporate, their financial policies and trade practices under the law of the government. The 11 titles are the basic policies of this act which are laid as the governing policy by the government of USA.
The Titles of Sarbanes Oxley 2002 are
TITLE I - PCAOB or Public Company Accounting Oversight Board With Title I, PCAOB or Public Company Accounting Oversight Board was set up to look in the working carried out in public accounting firms which will enable the government to keep oversight on the practices of such companies. This act enables the government to inspect the records and of private firms and provide them with auditors who will look into the trade practices of the company trade practices and control there unlawful trade activities. TITLE II - Auditors Independence- Title II states that the job of the auditor is limited to the work of auditing accounts. He cannot be forced to perform in a deliberate manner which will affect the accounts or the business report of the company. TITLE III - Corporate Responsibility Title III issues directives that the senior executives should interest in the financial reports. If the audit report is not complete or there are certain discrepancies on the part of the company, then the senior executives are liable for punishment under non-compliance act which includes serious penalties. The Section 302 of Sarbanes Oxley 2002 states that the Chief Executive Officer or the Chief Financial Officer of the company should certify the genuineness of the financial reports every quarterly. TITLE IV - Enhanced Financial Disclosures Title IV says that it is mandatory that all the financial transactions should be reported to the Securities and Exchange Commission (SEC) so that a proper financial report is formulated by the auditing committee. TITLE V - Analyst Conflicts of Interest Title V says that it is the responsibility of the security analysts to inform the investor about the prospects of the company in which investment is made. No information should be kept away on the part of the security analyst who can harm the investments of the investor in near future. TITLE VI - Commission Resources and Authority Title VI has four sections which define practices to gain the confidence of the investor in security analysts. It SEC privilege and authority to bar any broker if he is not competent enough in his job. TITLE VII - Studies and Reports Title VII has five sections which were put into the force in opposition to violations because of auditors and companies. TITLE VIII - Corporate and Criminal Fraud Accountability Title VIII has seven sections in total and is also known as Corporate and Criminal Fraud Act 2002. It lays down terms which can state any company fraud if it is not abiding by the policies of the government. TITLE IX - White Collar Crime Penalty Enhancement Title IX has two sections which are also known as White Collar Crime Penalty Enhancement Act 2002. This section enforces the extent of the penalties related to white-collar crimes. This law states that stringent method of punishment should be devised for White Collar Crime. TITLE X - Corporate Tax Returns Title X has one section as per which the returns filed by the company should be signed by the Chief Executive Officer (CEO). TITLE XI - Corporate Fraud Accountability Title XI includes seven sections which make provision for defaulters and their penalties. Thus, these are some of the basic guidelines which make the Sarbanes Oxley 2002 competent in the public finance sector which looks in the interest of investor and the government at large by curbing the malpractices of private companies.
| 