THE SARBANES-OXLEY ACT

The Sarbanes-Oxley Act

Introduction

The paper deals with the idea that pertains to the role of law, as well as, the induction of such implications of law that could spare the public from the fraud that happen from within the corporation, the paper mainly revolves around the implication that are stated in 'the Sarbanes Oxley Act of 2002'. The purpose of the act is to enhance the flow of internal controls so as to eradicate the culture of fraud pertaining from within the public corporations. It is designated to make the flow of funds transparent and accurate, whereas, strengthen the financial accuracy for the public protection from fraud.

After the proposal of the act, significant changes are induced in the reporting of the public limited companies regarding the financial data. The fraudulent acts have almost reduced to more than half and the faith of investor is being restored in the stocks with its relevant offerings. The notion of the law was to integrate the flow of financial information to the principles of ethics, reliability and authentication for the public (Stults, 2010).

The problem background

The assignment addresses the role of Sarbanes-Oxley Act 2002 in addressing the notion of the fraud of the public corporations. The whole idea of the fraud pertains to the phenomena of creative accounting. Public corporations are defined as the corporations that have the ownership of stock holders, that is, the corporations that offer shares to public, and therefore offer them a stake in the profits and losses of the company.

A very common practice that is carried by the people inside the company, that is, to build the idea that encompasses of the manipulating the accounting figures, and therefore, rendering figures that are not representative of the profits, earnings and expenses of a given period. The notion for the development of such phenomenon pertains to the issue that public invests a huge amount of money in the business, and therefore, they own a lion's share in the net earnings of the company. The internal employees of the company belonging to a particular layer are therefore involved in transferring a huge amount of money to their personal accounts, this goes with the manipulation of financial records.

The practice is very common in corporate world, the notion is to steal the money from the public, and therefore, show figures that are not representatives of the actual figures of the company's financial status by that time. The problem is addressed through the implication of the Sarbanes Oxley act, (SOX). The act is designed to create a sound mechanism pertaining to the enhancement of internal controls, as well as, the assurance that the figures upon the financial statements of the company are authenticated and justified by the earnings and operations. This aids the money of public going down the drain, and therefore, they reap the reward of their investment (Holt, 2007).

The Sarbanes-Oxley act

About the act

The act became the part of the federal law of the country on the 30th day of ...