Corporate Responsibilities Of Sarbanes Oxley Act Of 2002

4874 words - 20 pages

Patrick Chamberlain
Dr. Wokukwu
Intermediate Accounting
October 13, 2011

Corporate Responsibility of Sarbanes Oxley Act of 2002

To first understand the corporate responsibilities of the Sarbanes Oxley Act of 2002, otherwise referred to as SOX; you first need to understand that the Act was created for. The SOX came into effect in July 2002 and it was introduced for major changes to the regulation of corporate governance and financial practice. The act was also known as the ‘Public Company Accounting Reform and investor Protection Act of 2002’ in the senate and was called ‘Corporate and Auditing Accountability and Responsibility Act’ in the house. SOX set new and enhanced ...view middle of the document...

Roosevelt.” [6] The debate still continues over what the perceived benefits and cost of the SOX should be but opponents of the bill claim that it has reduced America’s international competitive edge against Foreign Service providers. The act introduced an overly complex regulatory environment into the United States financial markets. They say that SOX has been a godsend for improving the confidence of fund managers and other investors with regard to the truth of corporate financial statements. [6]

The Sarbanes Oxley Act of 2002 contains 11 titles that describe specific requirements for financial reporting. The first requirement is the Public Company Accounting Oversight Board (PCAOB) which consists of nine sections and establishes the PCAOB to give independent oversight of the public accounting firms providing audit services. [6] The title also consists of a central oversight board equipped with registering auditors, defining the specific processes and procedures for compliance audits, enforcing compliance with the specific mandates of SOX, and inspecting and policing conduct and quality control. [6] The next title is the Auditor Independence which consists of nine sections for the standards of external auditor independence. It also addresses new auditor requirements for reporting and it also restricts auditing companies that provide non audit services to the same clients. The third title is Corporate Responsibility which consists of eight sections and mandates that senior executives take individual responsibility for the accuracy and completeness of corporate financial reports. [6] It defines the interaction of external auditors and corporate audit committees, and specifies the responsibility of corporate officers for the accuracy and validity of corporate financial reports. It tallies specific forfeitures of benefits and civil penalties for non-compliance. [6] More on Corporate responsibility will be explained later on. The fourth title is the Enhanced Financial Disclosures and it also has nine sections. [7] It describes the enhanced reporting requirements for financial transactions, including off-balance-sheet transactions, pro-forma figures and stock transactions of corporate officers. It requires internal controls for guaranteeing the accuracy of financial reports and disclosures, and commands both audits and reports on those controls. It also requires timely reporting of material changes in financial condition and specific enhanced reviews by the SEC or its agents of corporate reports. [6] The fifth title is Analyst Conflicts of Interest and only has one section which includes measures designed to help reinstate investor confidence in the reporting of securities analysts. It defines the codes of conduct for securities analysts and requires disclosure of knowable conflicts of interest. [6] The sixth title is Commission Resources and Authority and consists of four sections and describes practices to restore investor confidence in...

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