Sarbanes Oxley Act of 2002 was passed after a public demand which grew due to the scandalous exposure of several high level financial scandals in which a number of big corporate giants were involved. A number of Fortune 500 companies were found involved in these scandals and the investor confidence, had hit rock bottom. The purpose of Sarbanes Oxley Act was to empower the Securities and Exchange Commission of the U.S. so that it can keep an eye on the corporate governance and the investor’s confidence in the market shall be reinstated.
Despite overflowing amounts of legalese, there are two major purposes of the Sarbanes Oxley Act. They are to ensure transparency and accountability by implementation of Sarbanes oxley compliance. These purposes are to be fulfilled at the pain of fine or punishment or both. President Bush informed that no law of such significance to businesses has been signed since the presidency of Franklin D. Roosevelt in the U.S. which reflected the significance of this act.
The main purpose of Sarbanes Oxley Act is to ensure that the corporate sector works with transparency and provides full disclosure of information as and when required. The transparency purpose of Sarbanes Oxley Act is fulfilled by ensuring real time disclosure of information, the adherence to guidelines of the Generally Accepted Accounting practices, full financial details being made available of all the transactions not mentioned in balance sheet. This purpose of Sarbanes Oxley Act is also fulfilled by an expanded disclosure of financial and non financial control measures in force in every company. Similarly, public certification of these internal controls and financial measures also helps fulfill the purpose of Sarbanes Oxley Act.
An increased set of responsibilities delegated to the audit committee also help fulfill the purpose of Sarbanes Oxley Act. Similarly in order to fulfill the requirements of the Sarbanes Oxley Act, the public auditors are put under increased regulatory control of the Securities and Exchange Commission which has newly formed the Public Company Accounting Oversight Board for this purpose. You can read more free advice on Sarbanes Oxley at http://www.SarbanesOxleyReviews.com
Company CEO and CFO
A number of measures related to company CEO and CFO as well as financial affairs of the company have been delegated to fulfill the purpose of purpose of Sarbanes Oxley Act. The company CEO and CFO would be required to publicly certify the financial reports and data related internal controls. Similarly, insider transactions must be regulated like loans to directors and executive officers, transactions which involve company securities need to be reported in two business day and CEO and CFO to be responsible for compensation to company in case their misconduct leads company in trouble.
The purpose of the Sarbanes Oxley Act was to protect investors from the possibility of fraudulent accounting activities by corporations. The corporations can deploy Sarbanes Oxley software solutions to ensure compliance. To bring about such transparency, the law will have to be regularly amended by the Congress so that it meets the requirements of the hour.