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    Assignment On Sarbanes Oaxley Act 2

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    Haris Munir
    The Sarbanes-Oxley Act of 2002 was passed by Congress in response to major corporate accounting scandals to increase corporate accountability and protect investors. It created the Public Company Accounting Oversight Board to oversee auditors and strengthened accounting standards. Key provisions require CEOs and CFOs to certify financial reports, ensure internal controls, and be responsible for accounting errors. It also protects whistleblowers and includes criminal penalties for destroying documents or interfering with investigations.

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    Assignment On Sarbanes Oaxley Act 2

    Uploaded by

    Haris Munir
    155 views4 pages
    The Sarbanes-Oxley Act of 2002 was passed by Congress in response to major corporate accounting scandals to increase corporate accountability and protect investors. It created the Public Company Accounting Oversight Board to oversee auditors and strengthened accounting standards. Key provisions require CEOs and CFOs to certify financial reports, ensure internal controls, and be responsible for accounting errors. It also protects whistleblowers and includes criminal penalties for destroying documents or interfering with investigations.

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    Assignment on Sarbanes Oaxley Act 2

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    The Sarbanes-Oxley Act of 2002 was passed by Congress in response to major corporate accounting scandals to increase corporate accountability and protect investors. It created the Public Company Accounting Oversight Board to oversee auditors and strengthened accounting standards. Key provisions require CEOs and CFOs to certify financial reports, ensure internal controls, and be responsible for accounting errors. It also protects whistleblowers and includes criminal penalties for destroying documents or interfering with investigations.

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    Download as docx, pdf, or txt
    155 views4 pages

    Assignment On Sarbanes Oaxley Act 2

    Uploaded by

    Haris Munir
    The Sarbanes-Oxley Act of 2002 was passed by Congress in response to major corporate accounting scandals to increase corporate accountability and protect investors. It created the Public Company Accounting Oversight Board to oversee auditors and strengthened accounting standards. Key provisions require CEOs and CFOs to certify financial reports, ensure internal controls, and be responsible for accounting errors. It also protects whistleblowers and includes criminal penalties for destroying documents or interfering with investigations.

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    Sarbanes Oxley Act Summary

    Outline:
     What is Sarbanes Oxley Act?
     Why congress passed Sarbanes Oxley?
     Major provisions
     Bottom line
     Major titles

    Sarbanes Oxley Act

    “The Sarbanes-Oxley Act of 2002 is a law the U.S. Congress passed on July 30 of that year to
    help protect investors from fraudulent financial reporting by corporations.”

    The Sarbanes-Oxley Act of 2002 cracks down on corporate scam. It shaped the Public Company
    Accounting Oversight Board to supervise the accounting industry. It banned company loans to
    executives and gave job protection to whistleblowers. The Act strengthens the independence
    and financial literacy of corporate boards. It holds CEOs personally responsible for errors in
    accounting audits. The Act is named after its sponsors, Senator Paul Sarbanes, D-Md., and
    Congressman Michael Oxley, R-Ohio. It's also called SOX. It became law on July 30, 2002. The
    SEC enforces it.

    Why congress passed Sarbanes Oxley?

    The Sarbanes-Oxley (SOX) Act of 2002 came in response to highly publicized corporate financial
    scandals earlier that decade. SOX addressed the corporate scandals at Enron, WorldCom, and
    Arthur Anderson. It prohibited auditors from doing consulting work for their auditing clients.
    That prevented the conflict of interest which led to the Enron fraud. Although the corporations
    were legally responsible, the CEOs were not. So, it was difficult to prosecute them.

    Bottom line

    The Sarbanes-Oxley Act was passed by Congress to curb widespread fraudulence in corporate
    financial reports, scandals that rocked the early 2000s. The Act now holds CEOs responsible for
    their company’s financial statements. The act created strict new rules for accountants, auditors,
    and corporate officers and imposed more stringent recordkeeping requirements.
    Whistleblowing employees are given protection. More stringent auditing standards are
    followed. The act also added new criminal penalties for violating securities laws.

    Major provisions

    The Sarbanes-Oxley Act of 2002 is a complex and lengthy piece of legislation. Three of its key
    provisions are commonly referred to by their section number:

    1) Section 302
    2) Section 404
    3) Section 802

    SOX section 302:

    This section deals with corporate responsibility for financial reports. Some key point are
    discussed as under:

     Chief executive officer and Chief financial officer must review all financial reports.
     Financial report does not contain any misrepresentations.
     Information in the financial report is "fairly presented".
     CEO and CFO are responsible for the internal accounting controls.
     CEO and CFO must report any deficiencies in internal accounting controls, or any fraud
    involving the management of the audit committee.
     CEO and CFO must indicate any material changes in internal accounting controls.

    SOX section 404:

    According to section 404, it is responsibility of management and independent auditor to


    disclose all reports periodically. All financial statements and their requirement to be accurate
    and presented in a manner that does not contain incorrect statements or admit to state
    material information. Such financial statements should also include all material off-balance
    sheet liabilities, obligations, and transactions.
    SOX section 802:

    This sections shows criminal penalties for alerting documents. This section specifies the
    penalties for knowingly altering documents in an ongoing legal investigation, audit, or
    bankruptcy proceeding.

    Objectives

    Objectives of Sarbanes Oxley Act is to enhances corporate governance and strengthen


    corporate accountability. It offers protection whistleblowers who disclose instances of
    corporate mismanagement, fraud, or wrong-doings. Another objective of Sox is to create the
    Public Company Accounting Oversight Board (‘PCAOB’ a.k.a. ‘Peek-a-Boo’) tasked with
    enforcing professional standards, ethics, and competence for the accounting profession.

    Sarbanes Oxley Act Titles

    SOX is organized into eleven titles, each of them covering specific areas of corporate
    accountability and responsibility. These titles include:

    1) Public company accounting oversight board


    2) Auditor independence
    3) Corporate responsibility
    4) Financial disclosure
    5) Conflicts of interest
    6) SEC power
    7) Penalty
    8) Corporate tax return
    9) White collar crime penalty
    10) Corporate fund and accountability
    11) Studies and report
    CRUX
    According to the above discussion it is concluded that while the implementation of the Sarbanes
    Oxley Act could have proved potentially painful for smaller businesses, its ultimate deferral for
    companies with market capital of less than $75M was a positive development.

    Subsequent changes in audit standards are reported to have reduced the cost of audits by as
    much as 25% for many companies.

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