Sarbanes-Oxley Act

 Sarbanes-Oxley Act

Written by Shelley Godra

 

            The Sarbanes-Oxley Act of 2002 was created in response to the Enron and WorldCom financial scandals.  The purpose is to “protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws.”  The act is also intended to discourage corporate fraud and corruption by implementing severe consequences to those in violation. 

            The Sarbanes-Oxley Act, SOX, declares certain rules that a corporation must now follow in order to be in compliance with the Securities and Exchange Commission.  For example, the CEO of the company must attest to the validity of their financial statements or be held accountable for false reports.  A committee, the Public Company Accounting Oversight Board, was created through this Act to perform additional audits and investigations.  This committee also took over the responsibility of the managers hiring and firing accounting personnel.  Another rule was established for internal controls; a corporation needed to submit an internal controls report alongside their annual reports.  The SOX defines for a company the specific records that are to be stored and for how long.  The last major rule of the Act states the severe punishments, including 20 years in prison, for those company employees falsifying their financial statements and reports. 

            The SOX Act not only protects the interest of the shareholders and the public, but the Act also opened many opportunities in the accounting field.  Job openings for financial accountants, auditors, managerial accountants, and more are on the rise due to the fact that companies’ reports must be accurate and reliable.