Sarbanes-Oxley Act

Sarbanes-Oxley Act

Prelude: Sarbanes-Oxley Act

The Sarbanes-Oxley is a U.S. federal law that has generated much controversy, since this Act is in response to financial scandals of some large corporations, among which include cases involving Enron, Tyco International, WorldCom and Peregrine Systems. These scandals brought down the public's confidence in the accounting and auditing. Oxley (Republican). The law was passed by large majorities in both Congress and the Senate. The legislation covers and sets new standards for boards and management and accountability mechanisms of all publicly traded companies in the United States Introduces criminal liability for the board and establishes requirements by the SEC (Securities and Exchanges Commission), i.e., the regulator of the securities market in the United States.

The foremost significant part of the Act sets up a new quasi-public agency, "the Public Company Accounting Oversight Board", so that a company should be accountable for regulatory review. The Act also covers the independence of audit, corporate governance and financial transparency. It is considered one of the most significant changes in corporate law, from the "New Deal" of 1930. Section 402 of the Sarbanes-Oxley Act prohibits the issuance of loans to corporate executives. Non-profits may find themselves in a conflict of interest if they are transferring funds to organizational affiliates, especially as these funds were most likely donated with the intention of “doing good.” (Shakespeare, 2008, pp 218-219)

The whistle-blower protection set forth through the Sarbanes-Oxley Act in Section 806 provides protection from any form of retaliation for individuals who report fraudulence within a corporation. This provision is fully applicable to the nonprofit sector, where the disclosure of fraudulent activity within an organization may reveal a conflict of interest. Thus, these reports should be taken seriously, and the individuals providing them should be granted protection from any legal retaliation. (Shakespeare, 2008, pp 218-219)

Transparency ...