SOX (Sarbanes Oxley Act)

Abstract

Congress has passed the Sarbanes-Oxley Act of 2002 to for considering illegal audit practices and pension fund blackouts as there lacks control over quality measures, accounting, auditing, financial regulations and ethical behaviors which give rise to corporate scandals. The purpose of the Sarbanes-Oxley is the resulting situation that shall change corporate behavior. This paper will explore the effect of the act being made active in business practices and its effect on auditing practices for preventing frauds in the company.

Abstractii

Introduction1

Discussion2

Effectiveness of Regulation in minimizing corporate fraud2

Impact of the Act on the functioning of the business2

Auditing Practices2

Governance Practices3

Company disclosures3

Internal Controls3

Conclusion4

References7

SOX (Sarbanes Oxley Act)

Introduction

Sarbanes-Oxley Act (SOX) is a regulation that has been passed as a response to financial scandals like Enron and WorldCom for the protection of the shareholders and the public from any kind of fraudulent activities being practiced in the company. The act is administered under the laws of the Securities and Exchange Commission (SEC) which is responsible for setting the guidelines, and the companies have to comply with the rules and requirements (Rouse, 2007). Sarbanes-Oxley defines and separates the records on the basis of which records are to be stored and for what duration of time. The regulation is important for the business and the IT department in the corporation whose job is to store important information and records of the company. According to the act, business records are saved for not more than five years as Sec 802 (a) (1) states according to which any account who is responsible for conducting the aduti of the issuer under section 10A of the SEC Act of 1934 shall apply and maintain the audit work, review work papers for a period of 5 years starting from the last fiscal year until which the previous audit was conducted and concluded. The companies which do not comply with the regulations stated in the act are confronted to fines, imprisonment etc. This has posed a challenge for the IT departments as they have to create and maintain the records cost effectively to meet the demands of the legislation. The following paper discusses the effectiveness of the regulation in helping to minimize corporate frauds, its impact on auditing practices and if the act helps in reducing, minimizing or letting the situation remain same in case of scandals.

Discussion

Effectiveness of Regulation in minimizing corporate fraud

The Sarbanes-Oxley Act helps in minimization of widespread frauds as depicted in Section 802 (a) of the act according to which whoever knows and intentionally alters information, or destroys them, does not abide by the laws, conceals information, covers up, engage in false acts or makes changes with the entries and records, documents objects with the intention of covering up or obstructing or impeding information, influence investifation of any fraud within any department which is under the jurisdiction of the United States of America or contemplates any matter shall be fined or imprisoned under Title 11.

Among the laws and protections provided under the 1933 and 1934 laws of the ...