Sarbanes Oxley Act of 2002

- Meant to protect against corporate fraud as a response to financial scandals such as

that by Enron Corporation, Tyco International, and WorldCom.
- Led to stricter regulations for accountants, auditors, and corporate officers.
- Greater criminal penalties for violations

Five (5) Key Sections:

1. Section 302
a. Senior corporate officers have to personally certify in writing that the FS “comply
with SEC disclosure requirements & fairly present in all material aspects the
operations and financial condition of the issuer.” If these officers sign this
certification with the knowledge that said financial statements are inaccurate or
have been manipulated, they will be held liable and are subject to criminal
penalties which also include ​prison terms.​ Periodic statutory financial reports
must include certifications that:
i. Signing officers reviewed the report
ii. Report doesn’t have any material untrue statements/material
omissions/misleading statements
iii. FS fairly present the company’s financial condition
iv. Signing officers are responsible for internal controls which they must have
evaluated w/in the previous ninety (90) days
v. List of deficiencies in internal controls/information on fraud involving
employees
vi. Any significant changes in internal controls/other factors that could
negatively impact the internal controls
2. Section 401
a. Financial statements published by issuers
i. Required to be ​accurate
ii. Does not contain incorrect statements
b. Commission required to determine whether GAAP or other regulations result in
open and meaningful reporting by issuers
3. Section 404
a. Requires management & auditors to establish ​internal controls & reporting
methods ​(to ensure adequacy of controls)
4. Section 409
a. Issuers required to disclose to public information on ​material changes ​in their
financial condition/operations
b. ^ Must be easily understood & must present graphic presentations if appropriate
5. Section 802
a. 3 rules that affect recordkeeping
i. Destruction & falsification of records
ii. Defines retention period for storing records
iii. Outlines specific business records that companies need to store
b. Imposes penalties of fines and/or up to:
i. 20 years imprisonment for
altering/destroying/mutilating/concealing/falsifying records
ii. Penalties of fines and/or imprisonment of up to 10 years on any
accountant who knowingly and willfully violates the requirements of
maintenance of all audit or review papers for a period of five (5) years