Sarbanes-Oxley Act of 2002 Essay Example | Topics and Well Written Essays - 500 words - 1

Sarbanes-Oxley Act of 2002 - Essay Example The Sarbanes-Oxley Act (SOX) aims at more financial disclosures by companies to prevent accounting frauds. Due to this act a new agency, the Public Company Accounting Oversight Board, or PCAOB came into existence. The purpose of this agency is to oversee, regulate, inspect and discipline accounting firms that conduct auditing activities of public companies. SOX act is applicable to all US registered public companies. International companies that are registered with the SEC and the accounting companies that conduct auditing services are also covered in this Act. The Sarbanes-Oxley Act ensures corporate accountability and makes provision for penalties in case of violations. Section 302 of the Sarbanes-Oxley Act specifies corporate responsibility for financial disclosures. CEOs and CFOs are made accountable for the veracity of financial disclosures. The Act makes it mandatory to include an internal control report in all financial disclosures of companies. This is to ensure that the management is confident about the reported financial data because of necessary controls in place to verify authenticity of data. Each financial report will also conduct an assessment of the effectiveness of the internal controls to be certified by auditor of the firm. Section 1348 has been added in Chapter 63 of title 18 pertaining to securities fraud. Accordingly, Criminal penalties are enforceable for defrauding investors of the companies by false presentations. Criminal penalties are also enforceable under section 802 for modifying documents. Section 13 of the Securities Exchange Act of 1934 is further modified through section 409 of the Sarbanes-Oxley Act to provide Real Time Issuer Disclosures. Under the provision, any material changes in the financial condition must be provided by the companies to protect the interests of shareholders or investors. The auditor conducting an audit of