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Pros And Cons Of Sox Act Of 2002

718 Words3 Pages

Sarbanes-Oxley (SOX) act of 2002 was put in place to protect investors from fraudulent activities by corporations. The Act significantly tightens regulation of financial reporting by public companies and their auditors and accountants. Penalties for falsified financial activities are much more severe ever since. Publicly traded companies are required to file periodic financial reports to inform the public with key information on a company's liabilities, revenue, assets, and business activities. This data is extremely important to the market and investors rely on it to decide whether to sell or buy stock, competitors and partners depend on on it to make better business decisions. All of this data plays a role key in evaluating a company's value and its stock price. So a false financial statements can be misleading and even lead to widespread repercussions. The SOX Act is named after its …show more content…

Enron which was the seventh-largest company in America at the time were involved in the scandal due to its accounting practices the company eventually collapsed. Many Enron executives were ultimately convicted of financial crimes for falsifying the company's assets, overstated its earnings and hiding liabilities. SOX requires a company’s chief financial officer to certify that its financial reports are accurate. All publicly traded company are required to have internal controls in place to confirm accuracy in financial disclosures. SOX makes it a crime to deceive shareholders of publicly traded companies by the filing of false financial reports. Executives face fines ranging up to ten years imprisonment or $1 million dollars for knowingly attesting financial reports that don't comply with the regulations. Section 802 of SOX also criminalize executives for the fabrication and destruction of records in efforts to obstruct or delay an

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