Sarbanes Oxley Act Analysis
The intent of the Sarbanes Oxley (SOX) Act was to improve the accuracy of the information given to both boards and shareholders. It requires entities to adopt the existing best practices for information reporting. The Act accomplished this goal by applying the following provisions: repairing incentives and independence in the auditing process, creating stricter penalties for providing false information and forcing companies to validate their internal financial regulation processes.
The SOX Act put clear limits and boundaries on the amount of non-audit fees that an accounting firm can earn from the same firm that it audits and it also required that audit partners rotate every 5 years to limit. These changes make it so one auditing firm does not grow too comfortable with one company, eliminating some potential for collusion. SOX called on the Securities and Exchange Commission (SEC) to force companies to have audit committees that are …show more content…
It required both the CEO and CFO to personally refute to the accuracy of the financials statements presented to shareholders. Penalties for providing false or mislead financial statements was increased to fines of as much as $5M million and imprisonment of a maximum of 20 years in prison. This, like the other provision mentioned above, eliminated potential for fraud.
With the implementation of the SOX Act, companies were forced to implement and validate their financial process. The SOX Act requires senior management and the boards of public companies to be comfortable enough with the process where funds are dispersed and controlled. The outcomes monitored throughout the firm should be willing to prove that they can support the company's financial process for its effectiveness and validity. This section of the Act gains the most attention because of such provisions can provide to be very onerous especially for a smaller
The SOX Act put clear limits and boundaries on the amount of non-audit fees that an accounting firm can earn from the same firm that it audits and it also required that audit partners rotate every 5 years to limit. These changes make it so one auditing firm does not grow too comfortable with one company, eliminating some potential for collusion. SOX called on the Securities and Exchange Commission (SEC) to force companies to have audit committees that are …show more content…
It required both the CEO and CFO to personally refute to the accuracy of the financials statements presented to shareholders. Penalties for providing false or mislead financial statements was increased to fines of as much as $5M million and imprisonment of a maximum of 20 years in prison. This, like the other provision mentioned above, eliminated potential for fraud.
With the implementation of the SOX Act, companies were forced to implement and validate their financial process. The SOX Act requires senior management and the boards of public companies to be comfortable enough with the process where funds are dispersed and controlled. The outcomes monitored throughout the firm should be willing to prove that they can support the company's financial process for its effectiveness and validity. This section of the Act gains the most attention because of such provisions can provide to be very onerous especially for a smaller