In 2002, change came to the financial reporting sector for entities in the form of regulation and governance. The change, Sarbanes-Oxley or Sox Act, was a new federal law, setting new standards for financial reporting that public entities, management, and accounting firms to obey by. Sox put accountability on management to now certify the accuracy of their financial statements, information provided to the public, and increase penalties for fraudulent financial acts. Also, increase the independence between outside auditors who review financials for firms and increased oversight of Board of Directors. Sox was named for the two men who led the reform for regulation in financial reporting and set numerous deadlines for complaints, Senator Paul Sarbanes and Representative Michael Oxley. It is arranged into eleven titles and most people consider the following sections: 302, 401, 404, 409, and 802 to be most important of all (“The Sarbanes-Oxley Act Of 2002”, 2006).
According to “The Sarbanes-Oxley Act Of 2002” (2006), “Section 302 of the Act mandates a set of internal procedures designed to ensure accurate financial disclosure.” This section establishes in signing an officer to certify responsibility for establishing and maintaining internal controls to make sure that material information of the business or entity is known during the periodic reports that are being prepared. The maintenance of internal control by management ensures that material information is not being provided for reports. This is essential when being assessed by our side auditors in compliance with Section 404 of Sox. It requires top management or audit committee and outside auditors to review on internal controls and whether or not they are adequate enough.
The Essay on An Agreement to Compensate for a Past Voluntary Act Section 26(b)
In this case, Froddo has found a golden ring during a journey to Modor. Froddo took the golden ring as he knew the ring was belonged to Gandalf. Literally, Froddo did not aware about the advertisement that Gandalf advertised earlier that he has offered RM5000 for reward to those who found the ring. In this case, Froddo can claim the reward from Gandalf although there was no consideration been made ...
This can be costly for entities to implement because samples of documentation, testing of internal controls, review of manual, and automated systems implemented by entity which enormous maintenance and time. Assessing internal control is design efficiency, outside auditors relate to specific accounts and relevant information in context of material mistake can prevent fraudulent financials being provided to the public. Section 401 of Sox, is a disclosure of periodic information for off-balance sheet instruments and items that were not previously disclosed. During Enron’s bankruptcy, investigators and auditors brought attention to off-balance-sheet instruments being used, which moved assets and debt from the off-balance sheet to make financials reports more lucrative and look like great opportunity for potential investors.
According to “The Sarbanes-Oxley Act Of 2002” (2006), “Requires the disclosure of all material off-balance sheet items.” The Sox requiring disclosure of materials from off-balance-sheet items lets potential investors review financials more adequately and in-depth to prevent entities misleading investors. Which leads to section 409 stating, “ Issuers are required to disclose to public, on urgent basis, information on material changes to the financial conditions or operations. These disclosures are to be presented in a term that are easily to understand supported by trends and qualitative information of both graphics presentation as appropriate.” (“The Sarbanes-Oxley Act Of 2002”, 2006) This ensures for example, that an entity must disclose any change such as moving from cash basis to accrual basis.
Section 802 of Sox is penalties, fines, and even imprisonment for alerting, destroying, and falsifying/ altering document or intangible objects, and trying influencing legal investigation. Also imposes penalties or fines for accountants who participate willfully and violate requirements of work papers for auditors. This ensures that all parties will be punished for extent of the law, which hopefully discourages employees and management to falsify financial statements of entity.
The Business plan on Balance Sheet and Public Sector Reform
Financial control 1.1 Assess the relationship(s) between a financial system or function and other systems or functions in an organisation Answer: Information and records are of critical importance to the functioning and controlling of systems in general, including organisational systems. Given the central importance of information and records to systems operation, including public sector ...
In conclusion, Sox was praised for setting an ethical standard and culture for future management to be accountable and responsible. Specifically for the behaviors of entities and financial officers describing specific benefits and civil penalties for non-compliance of Sox.
References
The Sarbanes-Oxley Act of 2002. (2006).
Retrieved from http://www.soxlaw.com
