Sarbanes-Oxley Act Of 2002 Essay

The Sarbanes-Oxley Act of 2002 was passed by Congress to protect investors from fraudulent accounting records. The passing of the act forced strict regulations upon publicly traded companies to improve the accountability of accounting records for investors as a result of the extreme levels of malpractice that occurred in the late twentieth and early twenty-first centuries. The implementation of the SOX Act changed the way accounting records were checked for injustices. With the act, upper level managers were required to certify financial statements for accuracy (section 302), it required management and auditors to establish internal controls along with reports on the efficiency of the costly controls (section 404), and added required outlines for electronic record keeping (section 802). To protect investors, Section 302 of the SOX Act required chief executive officers and chief financial officers of publicly traded companies to certify the accuracy of their company’s financial records. This component of the act was included in the bill to ensure that company heads were actively involved in the financial components of their companies. Reports and results also needed to be communicated to management in a timely matter. The

This section was included to reduce potential for fraud in publicly traded companies by adding more strict procedures and requirements for financial reporting. Management was responsible to create or enhance their internal controls and follow-up with a report assessing the effectiveness of the control structure. For many companies, this section was the most complicated and most expensive to implement because it also required management to report on the shortcomings of the controls. These reports also needed to be checked for accuracy by an external, registered auditor to confirm the operation and effectiveness of the