SABARNES-OXLEY

ACT OF 2002
 WHAT IS SABARNES-OXLEY ACT OF
2002?
• The Sarbanes-Oxley Act of 2002 cracks down on
corporate fraud. It created the Public Company
Accounting Oversight Board to oversee the
accounting industry.
• Named after its sponsors, Senator Paul Sarbanes, D-
Md., and Congressman Michael Oxley, R-Ohio. It's
also called Sarbox or SOX.
• It became law on July 30, 2002.
 WHAT IS SABARNES-OXLEY
ACT OF 2002
• The act created strict new rules for accountants,
auditors, and corporate officers and imposed more
stringent recordkeeping requirements.
• Four Principal Areas:
1. Corporate responsibility
2. Increased criminal punishment
3. Accounting regulation
4. New protections
 MAIN PURPOSE OF SABARNES-OXLEY
ACT OF 2002
• 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, securities analysts and
legal counsel.
 MAIN PURPOSE OF SABARNES-OXLEY
ACT OF 2002
• 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 the Generally Accepted
Accounting practices, full financial details being made
available of all the transactions not mentioned in
balance sheet
 WHAT DID THE SARBANES OXLEY ACT OF 2002
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 business
practices at publicly traded companies.
 WHAT DID THE SARBANES OXLEY
ACT OF 2002 DO?
The FBI has created three categories of corporate fraud:
• Falsification of financial information
• Self-dealing by corporate insiders
• Obstruction of justice
• FBI established the Corporative Fraud Initiative.
• Yet despite this initiative, the 2008 annual report of the
Association of Certified Fraud Examiners estimated that
fraud resulted in losses of seven percent for
corporations on an annual basis or approximately $994
billion per year.
 Why was the Sarbanes Oxley Act 2002?
• In late 2001, people began to notice some accounting
irregularities with a 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 being nearly
worthless.
• The U.S. Congress passed the Sarbanes-Oxley Act of 2002
on July 30 of that year to help protect investors from
fraudulent financial reporting by corporation.
 Why was the Sarbanes Oxley Act 2002?
• It was passed due to the accounting scandals that
resulted in billions of dollars in corporate and
investor losses.
• It was introduced by the U.S. Senator – Paul
Sarbanes of Maryland and U.S. Representative
Michael Oxley of Ohio, their intention was to create
a law which would restore the faith of investors
back into Corporate America.
 HOW MANY ARTICLES ARE IN SABARNES-OXLEY ACT
OF 2002?
• Sarbanes-Oxley Act is arranged into eleven titles.
• Most important sections are often considered to be 302, 401,404,
409,802.
SARBANES-OXLEY ACT SECTION 302
• 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 have reviewed the report.
• Does not contain any material untrue and omission statements.
• Fairly present the financial condition and the results.
• A list of all deficiencies
• Any significant changes in internal controls that could have a negative impact.
 SARBANES-OXLEY ACT SECTION 401
• Listed under Title IV of the act and pertains to “Disclosures in Periodic
Reports”
• Financial Statements are published by issuers are required to be accurate
and presented in a manner that does not contain incorrect statements.

SARBANES-OXLEY ACT SECTION 404

• 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.
 SARBANES-OXLEY ACT SECTION 409
• 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 easy to understand
• Supported by trend and qualitative information of graphic presentations as
appropriate.
SARBANES-OXLEY ACT SECTION 802
• Listed within Title IV of the act, and pertains to “Criminal Penalties for Altering
Documents”
• This section imposes penalties of 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 requirements of
maintenance of all audit or review papers for a period of 5 years.