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M BIlal 180770 Assignment

The Sarbanes-Oxley Act of 2002 (SOX Act) was passed by Congress to protect shareholders from accounting errors and fraudulent financial reporting by corporations in the wake of accounting scandals at companies such as Enron and WorldCom. The SOX Act established new regulations for public company boards, management, and public accounting firms. It requires companies and their executives to be more responsible for financial reporting and provides whistleblower protection. The act imposes penalties for those who fail to comply, including prison time and heavy fines.

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Bilal Ahmed
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48 views2 pages

M BIlal 180770 Assignment

The Sarbanes-Oxley Act of 2002 (SOX Act) was passed by Congress to protect shareholders from accounting errors and fraudulent financial reporting by corporations in the wake of accounting scandals at companies such as Enron and WorldCom. The SOX Act established new regulations for public company boards, management, and public accounting firms. It requires companies and their executives to be more responsible for financial reporting and provides whistleblower protection. The act imposes penalties for those who fail to comply, including prison time and heavy fines.

Uploaded by

Bilal Ahmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Assignment: Corporate and Business Law.

Name: Muhammad Bilal Ahmed


Roll no: 180770
Degree: BSAF 4-B
SOX ACT 2002:
The Sarbanes – Oxley Law is the federal law which was approved to help and
protect the shareholders and public from accounting errors and fraudulent
financial statements of corporations. This act is also known as Responsibility Act
of 2002.
Requirement of SOX ACT 2002:
This act was required:
 To create new strict rules for auditors and accountants.
 To regulate financial reporting and business practices of publically traded
companies.
 To set certain standards for audit reports.
 To protect the shareholders from accounting errors and fraudulent
financial reporting given by the company.
History of SOX ACT 2002:
The SOX Act 2002 was made and approved in US Congress on July 30, 2000 when
some publically traded companies such as Tyco International and WorldCom did
financial fraud with the shareholders and public by sharing the wrong financial
statements. This financial scandal
Clauses of SOX Act 2002:
Following are the main clauses of SOX Act 2002 below:
Section 302: It states that company officer should clarify that financial statements
are “comply with SEC disclosure requirements and fairly present in all material
aspects the operation and financial condition of user”. If the officer gives incorrect
information, he or she will face penalties including prison terms.
Section 401: It stats that the company should represent true value of its position
and also requires the company to show the off balance transactions in financial
reports.
Section 404: It stats that management and auditors should establish the internal
control and reporting methods to efficiently provide information to public or
shareholders of the organization.
Section 802: It stats that there are 3 rules that affect the recordkeeping. First
deals with destruction and fakeness of record. Second defines the retention period
of recordkeeping and last one tells about the saving of several business records.
Consequences of not abiding the SOX Act 2002:
If the company is not accepting the clauses of SOX Act 2002, it will face the legal
consequences which include:
 The sentence for securities fraud is up to 25 years.
 The sentence for obstruction of justice is up to 20 years.
 Heavy fines are imposed on violation of act.

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