Reviewer in Sarbanes-Oxley Act of 2002
business practices at publicly traded companies
Sarbanes- Oxley Act of 2002
 Cracks down on corporate fraud. IT created the
Public Company Accounting Oversight Board
(PCAOB) to oversee the accounting industry
 Named after its sponsors, Senator Paul
Sarbanes, D-Md., and Congressman Michael
Oxley, R-Ohio. It is also called SarbOx or SOX
 It became law on July 30, 2002
 The act created strict new rules for accountants,
auditors, and corporate officers and imposed
more stringent record-keeping requirements
FOUR PRINCIPAL AREAS
1. Corporate responsibility
2. Increased criminal punishment
3. Accounting regulation
4. New protection
Main Purpose
 The Act is designed to oversee the financial
reporting landscape for finance professionals.
 Its purpose is to review legislative audit
requirements and to protect investors by
improving the accuracy and reliability of
corporate disclosures
 Significantly tightens accountability standards
for directors and officers, auditors, security
analysts, and legal counsel
 To ensure that the corporate sector works with
transparency and provides full disclosure of
information as and when required
 By ensuring real time disclosure of information,
the adherence to guidelines of GAAP practices,
full financial details being made available of all
the transactions not mentioned in the balance
sheet
What did it do?
 Lawmakers created the legislation to help
protect shareholders, employees and the public
from accounting errors and fraudulent financial
practices
 Improve the reliability of the public companies’
financial reporting as well as restore investor
confidence in the wake of high-profile cases of
corporate crime
 Sought to regulate financial reporting and other
 The FBI Created the 3 categories of Fraud
1. Falsification of financial information
2. Self-dealing by corporate insiders
3. Obstruction of justice
 FBI established the Cooperative Fraud Initiative
 Yet despite this initiative, the 2008 annual
report of the Association of Certified Fraud
Examiners estimated that fraud resulted in
losses of 7% for corporations on an annual basis
or approximately $994 billion per year
Why was the Sarbanes Oxley 2002?
 In the late 2001, people began to notice
some accounting irregularities with large
publicly traded company. The company had
national reputation for consistency in both
good times and bad so it was considered a
blue-chip stock. The name of this company
is ENRON within weeks the stock went from
over 90 dollars a share to nearly worthless
 The US Congress passed Sarbanes-Oxley Act
of 2002 on July 30 of that year to help
protect investors from fraudulent financial
reporting by corporation
 It was passed due to the accounting
scandals that resulted in billion of dollars in
corporate and investor losses
 It was introduced by the US Senator- Paul
Sarbanes of Maryland and US Rep. Michael
Oxley of Ohio, their intention was to create
a law which would restore the faith of
investors back into Corporate America
Articles of Sarbanes-Oxley Act of 2002
 Sarbanes-Oxley Act is arranged into 11 titles
 Most important sections are often considered
to be 302, 401, 404, 409, 802.
Listed under TITLE III of the act pertains to “Corporate
Responsibility for Financial Reports”
Periodic Statutory Financial reports are to include
certifications that:
 The signing officers has reviewed the report
 Does not contain any material untrue and
omission statements
  Fairly represent the financial condition and the
results
 A list of all deficiencies
 Any significant changes in internal controls that
could have a negative impact

Listed under Title IV of the Act and pertains to

“Disclosure in Periodic Reports”

- Financial statements are published by issuers

are requires to be accurate and represented un
a matter that does not contain incorrect
statements

Listed under TITLE IV and pertains to “Management

Assessment of Internal Controls”

- Issuers are required to publish information in

their annual reports concerning the scope and
adequacy of the internal control structure and
procedures for financial reporting

Listed within TITLE IV and pertains to “Real Time Issuer

Disclosures”

- Issuers are required to disclose to the public

- Disclosures must be presented in terms that is
easy to understand
- Supported by trend and qualitative information
of graphic presentations as appropriate

Listed Within the Title IV if the Act, and pertains to

“Criminal Penalties for Altering Documents”

- This section imposes penalties or fines and/or

up to 20 years imprisonment for altering,
destroying, concealing, mutilating, falsifying
records, documents or tangible objects with the
intent to obstruct
- 10 years on any accountant who knowingly and
willfully violates the requirements of
maintenance of all audit or review papers for a
period of 5 years (Does not make sense)