From the e-Activity, recommend how the SOX framework can ensure reliable and complete financial information and how accounting professionals have benefited from its use. Provide support for your response.
The Sarbanes-Oxley Act itself is organized into eleven sections, but sections 302, 404, 401, 409, 802 and 906 are the most important in terms of compliance. Section 404 seems to cause the most difficulties for compliance. More specifically, Sarbanes-Oxley established new accountability standards for corporate boards and auditors, established a Public Company Accounting Oversight Board (PCAOB) under the Security and Exchange Commission (SEC), and specified civil and criminal penalties for noncompliance.
All applicable companies must establish a financial accounting framework that can generate financial reports that are readily verifiable with traceable source data. This source data must remain intact and cannot undergo undocumented revisions. In addition, any revisions to financial or accounting software must be fully documented as to what was changed, why, by whom and when. Besides lawsuits and negative publicity, a corporate officer who does not comply or submits an inaccurate certification is subject to a fine up to $1 million and ten years in prison, even if done mistakenly. If a wrong certification was submitted purposely, the fine can be up to $5 million and twenty years in prison.
Evaluate how the SOX has reinforced investors’ and creditors’ confidence in companies and how these individuals can take steps to verify the accuracy of the financial statements of potential investments or loans. Provide support for your rationale.
The SOX has reinforced investors and creditors confidence in many ways.
Audit quality has been improved by stronger alignment of independent auditors, independent audit committees, independent audit oversight authorities, and public company shareholders. In a 2008 audit committee survey reported by the Center for...