Submitted By: SANA RIZVI (180765)

Submitted To: SIR ATIF BILAL

Section “A”

Semester IV

Department of BSAF

Air University E-9 Islamabad

 CORPORATE LAW AND
GOVERNANCE
ASSIGNMENT # 01
Q: What was the history and need of this act?
History of This Act:

This act was passed by the Congress in 2002 in the fear of fraud and most of the
executives wanted combating fraud and they wanted to improve the reliability of
financial reporting and restoring the confidence of investors. This act was passed due to
the increasing number of accounting scandals that occurred from 2000 to 2002.

Q: What were the main themes and clauses of this act?

Main Themes:

The main theme/element was the section 404 of Sarbanes Oxley Act was that it was
management responsibility to maintain a good internal control for the financial
reporting process of the company and it was auditor’s responsibility to attest the
assessment of the management. Basically it had the motive of “taking control of
controls”. Its other clauses include:

 Strengthening the control environment

 Improving documentation

Q: What were the consequences of this act?

Consequences:

The biggest consequence of this act was that anyone not following this act would be
held with the maximum penalty for fraud from 5 to 10 years imprisonment. Also this act
had a very strong impact on the US Corporate Governance because this act required all
the companies to perform internal controls and to make the management liable for the
accuracy of financial statement.