Information About Sarbanes Oxley Act Of 2002
Senator Paul Sarbanes and a representative, Michael G. Oxley, formulated a law which was named in their honor. The act was signed as a law on the 30th of Jul of 2002 and came to be known as the Sarbanes Oxley act of 2002. It is also known by various other names like the Investor Protection act of 2002 and the Public Company accounting reform. The law was formulated as a result of wide spread dissent amongst investors. The investors were losing faith in the financial system owing to a large number of scandals which were both corporate and related to accounting along with various mal practices which had engulfed the system. The act is abbreviated as SOX and Sarbox. The act became a law after winning by a majority of 423 to 2 votes. It affected almost all major companies like Enron, WorldCom, and Tyco International.
The Sarbanes Oxley act of 2002 included had eleven (11) sections. The sections are:
- Section I - Public Company Accounting Oversight Board (PCAOB): the first section was instrumental in establishing the PCAOB. The PCAOB provides independent over sights of accounting firms of the public sector along with various and diversified audits. It is also responsible for the creation of centralized over sight boards and the registering of various and diversified audits. Section I consists of 9 sub sections.
- Section II - Auditors Independence: The second section of the Sarbanes Oxley act of 2002 is known as Auditors Independence and focuses on providing various rights which ensure the independence of various auditors throughout the United States of America. It consists of 9 sub sections. - Section III - Corporate Responsibility: This section makes the senior executives of all companies to take responsibility personally for the accurate completion of financial reports which are corporal in nature. - Section IV - Enhanced financial disclosures: The section has nine sub sections. The section describes the requirements for reporting financial transactions. It needs internal controls to assure the accuracy of the various financial disclosures and reports. - Section V - Analyst Conflicts of Interest: This section of the Sarbanes Oxley act of 2002 deals with the restoration of the confidence of the investor in reporting of analysts and securities. It clearly formulates the codes of conduct to be used for securities analysts. - Section VI - Commission Resource and Authority: It has 4 sub sections and clearly states the practices to be followed to restore the confidence of the numerous investors in the securities analysts. - Section VII - Studies and Reports: It consists of 5 sub sections that deal with the conduction of research dealing with the enforcement of strict action against violators of the rules and regulations. - Section VIII - Corporate and Criminal Fraud Accountability: It details specific penalties to be given to corporate criminals for crimes like fraud, manipulation, alteration or complete destruction of various financial records. - Section IX - White Collar Crime Penalty Enhancement: It increase the penalty to be given out to individuals linked to crimes which are white-collar in nature. - Section X - Corporate Tax Returns: The section of the Sarbanes Oxley act of 2002 clearly stated the tax return of the company should be signed by the Chief Executive Officer. - Section XI - Corporate Fraud Accountability: It consists of seven sub sections and deals with various offenses like records tampering and corporate fraud. The Sarbanes Oxley act of 2002 has been instrumental in shaping the face of the economy of the United States of America and in turn has affected the world economy.
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