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The Sarbanes-Oxley Act

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Sarbanes Oxley: Is it working?

The Sarbanes-Oxley (SOX) Act was established and passed by U.S. Congress in 2002, after the accounting scandals from Enron and other corporate accounting corporations such as Tyco International plc, and WorldCom so as to protect investors from the risks of falsified accounting activities and/or document by corporations through transparent financial report, thus restoring and increasing investors confidence in the U.S financial segments. In addition, Sarbanes-Oxley was intentionally not only established to prevent fraud, but to avert theft, financial scandals, and improve public confidence and trust in the financial reporting of corporate organizations. Sarbanes-Oxley was the enacted federal legislation that focuses …show more content…
However, Sarbanes-Oxley is also significant to assessing the financial controls and reporting of all organizations. As a result, company ranges from small sizes to larger sizes are been influenced by Sarbanes-Oxley. Sarbanes-Oxley emphasizes the importance of effective internal control. Internal controls are procedures and process a company use to safeguard its assets, process information accurately to ensure compliance with laws and regulations. Sarbanes-Oxley is not only aimed to maintain effective internal controls of the recorded transactions and the preparation of financial statements that discourage fraud and misleading financial statements, but it is also intended to improve auditor independence through restriction of the non-audit services that is provided by an auditing firm to its audit clients following an audit-partner rotation with established professional regulation and …show more content…
The two key provisions of the Sarbanes-Oxley Act are Section 302 and Section 404. Section 302 is a mandates senior management to certify the accuracy of the reported financial statement. Section 404 requires management and auditors establish internal controls and reporting methods on the adequacy of those controls. In addition to Sarbanes-Oxley requirements on the financial audits, accuracy and controls, the Sarbanes-Oxley Act also provides the requirements for information technology (IT) departments regarding electronic records. The Sarbanes-Oxley Act does not set any standard practice on company’s information technology, but instead it defines the company records that need to be stored on file and for how long and only that the IT department is responsible to store such information. Section 802 of Sarbanes-Oxley Act contains the three rules that affect record keeping. The first deals with destruction and falsification of records. The second strictly defines the retention period for storing records. The third rule outlines the specific types of business records that need to be stored, and this includes electronic

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