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Sarbanes-Oxley act
Back ground
An act passed by U.S. Congress in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations. The Sarbanes-Oxley Act (SOX) mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. SOX was enacted in response to the accounting scandals in the early 2000s. Scandals such as Enron, Tyco, and WorldCom shook investor confidence in financial statements and required an overhaul of regulatory standards.
Benefits of Act
Three quarters of the financial executives in the Oversight Systems survey said that their company had realized a benefit from Sarbanes-Oxley compliance. The main ones were that it:
- Ensures the accountability of individuals involved in financial
- Decreases the risk of financial fraud.
- Reduces errors in their financial operations.
- Improves the accuracy of financial reports.
- deeper information.
- Strengthens investors’ view of the company.
The main titles
1- public company accounting oversight board
A non-profit organization that regulates auditors of publicly traded companies.
The PCAOB was established as a result of the creation of the Sarbanes-Oxley Act of 2002. The board's aim is to protect investors and other stakeholders of public companies by ensuring that the auditor of a company's financial statements has followed a set of strict guidelines.
Section 101: Board Membership
Section 102: Registration with the board
Section 103: Standards and Rules
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