SARABNES-OXLEY ACT

2002
PRESENTED BY GAURAV
SINGH
BCOM HONS (6TH SEM)
 SARBANES-OXLEY
ACT 2002
01 nick name(s) = sarbane-oxley , sarbox , sox

02
passed the house on April 24 , 2002 votes 334 - 90
passed the senate on July 15 , 2002

03 signed into law by the president George W.Bush on July 30 , 2002

 INTRODUCTI
ON
It emphasizes on transparency , accountability and integrity in financial reporting , as well as restoring
investor confidence in the wake of widespread corporate misconduct.

The sox act strengthen the corporate governance practices by imposing stricter regulation and requirement
on publicly traded companies , their executives and auditors.
 BACKGROUND
This act come into existence due to high profile corporate scandals like ENRON ,
WORLDCOM and TYCO INTERNATIONAL during the period 2000s.

These scandals underscored the inadequacies of existing regulatory framework and

the urgent need for comprehensive reform to restore confidence in corporate world
and safeguard the investor interest.
 Key provision of sox

act
Section 302 -
Section 404 -
CEO and CFO
Internal Control
certification

Section 802 -
Criminal penalties
 SECTION 302

It enhances corporate accountability and transparency in financial reporting

 CEO AND CFO responsibilities : obligation to certify the accuracy , completeness and fairness of
financial statement , as well as effectiveness of internal control.
 CERTIFICATION requirement : need to provide written certifications accompanying each periodic return
filed with the SEC.
 Implication for Non – Compliance: There is potential civil and criminal penalties , reputational damage
and loss of investor trust.
 SECTION 404

SEC 404 of SOX mandates the public company establish and maintain effective internal control over
financial reporting.
Specifically it requires management to assess the effectiveness of internal control and provide an annual
report on their assessment , including the company’s auditor’s attestation.
It aims to enhance transparency and accountability in financial reporting ,restore investor confidence , and
reduce the risk of financial misstatements or irregularities.
 SECTION 802

SEC 802 of SOX imposes severe penalties for tampering with or altering documents related to financial
reporting. It prohibits knowingly altering , destroying , concealing , or falsifying records , documents or
tangible objects with the intent to obstruct , influence , or impede any official proceeding or investigation.
Violation of SEC 802 can result in criminal prosecution , including fine and imprisonment for individual
find guilty of such offense.
Additionally , It prohibits the retaliation against whistleblowers who report violation of SOX.
 COMPLIANCE

CHALLENGES
SOX act present several challenges specially to SMEs

COMPLEXITY OF COST OF RESOURCE TECHNICAL CHANGE

REUIREMENT COMPLIANCE CONSTRAINTS CHALLENGES MANAGEMNT
 BENEFITS OF
SOX
ISOX has brought several significant benefits for companies , investors and financial markets.

Improved Increased Enhanced Risk Reduction Stronger Global Impact

Corporate Investor Transparency Enforcement
Governance Confidence
 CASE
STUDIES
This slide presents case studies that demonstrates the practical implication and outcomes of compliance with
SOX act.

ENRON SCANDAL WORLDCOM COLLAPSE TYCO INTERNATIONAL HEALTHSOUTH

It is one of the most It was once a leading A multinational CORPORATION
infamous corporate collapse telecommunication conglomerate faced A Healthcare service provider
in history , involving company , filed for allegation of corporate fraud , became embroiled in
widespread accounting fraud bankruptcy in 2002 following and misconduct in the early massive accounting fraud
and financial mis revelation of massive 2000s , resulting in criminal scandal in early 2000s ,
management. accounting irregularities , charges against top executive involving the inflation of
Enron manipulation of including inflation of earning for looting the company of earnings and assets to meet
financial statement and through improper accounting billions of dollar through financial targets.
balance sheet transaction led policies. unauthorized compensation
to its bankruptcy in 2001 and and fraudulent transaction.
subsequent enactment of
SOX in 2002.
THANK YOU