To protect investors by improving the accuracy and reliability of corporate . July 30, 2002 [H.R. The headlines had been full of prominent compa-nies involved in financial scandals and bankruptcies: Enron, Worldcom, Xerox, The Sarbanes - Oxley Act created the Public Company Accounting Oversight Board. The purpose of the Sarbanes-Oxley Act was to crack down on corporate fraud. The Sarbanes Oxley Act, passed by the U.S. House of Representatives in 2002, attempts to bring in improved principles and accountability in the operations of companies in the U.S. Section 404 of the Sarbanes-Oxley Act requires public companies' annual reports to include the company's own assessment of internal control over financial reporting, and an auditor's attestation. Some of the biggest names involved were Enron, Tyco and Worldcom. Sarbanes-Oxley Act. The Sarbanes-Oxley Act of 2002 is a law that has 11 sections, each with different mandates. It has been considered as a major comprehensive legislation in recent years in US business security affairs. 2  The Act strengthens the independence and financial literacy of corporate boards. AT THE SECOND SESSION. Introduction. Many other countries responded by creating their own versions of SOX. Despite overflowing amounts of legalese, there are two major purposes of the Sarbanes Oxley Act. The Sarbanes-Oxley Act highlighted some of the faulty accounting and dishonest business practices which contributed to the recession of the early 2000s.This article focuses on Title II of the Sarbanes-Oxley Act, a section of the Act that discusses auditor independence. Identify three of the criminal penalties that can be charged under the Sarbanes-Oxley Act. The procrastinators need to start viewing the Sarbanes-Oxley Act of 2002 as an ally in that effort. See Answer. The Sarbanes-Oxley Act of 2002. The act, (Pub.L. Additionally, Congress recognized that questions remain regarding the approach by which accounting standards are established. The Sarbanes-Oxley Act of 2002, often simply called SOX or Sarbox, is U.S. law meant to protect investors from fraudulent accounting activities by corporations. Organizations who attempt to avoid fulfilling us requirements can be penalized in accordance with the provisions of the Act. The measuring stick as to whether a company meets the standards of SOA is determined by the effectiveness of the design of and compliance to its internal processes. The Sarbanes-Oxley Act of 2002 was bought into enactment on the back of multiple corporate financial scandals in the early 2000's. Since then, all public companies are now required to create and implement processes that report to SEC compliance. Congress reacted to corporate financial scandals, including those affecting Enron, Arthur Andersen, and WorldCom, by passing the Sarbanes-Oxley Act of 2002. When Congress enacted the Sarbanes-Oxley Act (SOX) in 2002, it included a whistleblower protection provision to combat a "corporate code of silence," a code that "discourage[d] employees from reporting fraudulent behavior not only to the proper authorities, such as the Federal Bureau of Investigation and the SEC, but even internally." Non-compliance of the law attracts major penalties on company boards. Check out a sample Q&A here. The Act was spurred by major accounting scandals, Top Accounting Scandals The last two decades saw some of the worst accounting scandals in history. It defines and enforces the procedures necessary for audits to be in compliance with the Act. Companies like Enron (an energy firm), WorldCom (telecommunication) and Tyco . Those guidelines, aka Section 404, are the controversial part of SOX. Congressmen Paul Sarbanes and Michael Oxley, was aimed . Internal audit officially reports to the board of directors' audit committee but is a part of the day-to-day management team. What does Section 404 of the Sarbanes-Oxley Act require?View Solution: What does Section 404 of the Sarbanes Oxley Act require. It created the Public Company Accounting Oversight Board to oversee the accounting industry. Its purpose is to review legislative audit requirements and to protect investors by improving the accuracy and reliability of corporate disclosures. Section 302: As a result of SOX, Company Financial transactions & records must be - transparent, with clear intentions, without any partiality or biased . The Sarbanes-Oxley Act of 2002 ("the Act") sought, among other things, to improve our system of financial reporting by reinforcing the checks and balances that are critical to investor confidence.

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