Sarbanes-Oxley Act (Sox) 2002: CEOs & CFOs

Topics: Enron, U.S. Securities and Exchange Commission, Balance sheet Pages: 2 (622 words) Published: January 10, 2014
Sarbanes-Oxley Act (Sox) 2002: CEOs & CFOs
The Sox Act in 2002 enhanced the responsibilities of the CEOs and CFOs by requiring them to certify the accuracy of the financial statements and making sure that there is no intention of fraudulence.  Furthermore, they could significant penalties such as that they could face up to 10 years for “knowing” violations and up to 20 years if “willing” as well as criminal charges for certifying false information. In addition, they will be prohibited from holding corporate positions as directors or office in the future by the SEC (Fordham International Law Journal, 2003). The main purpose behind this is to make sure that any wrongdoing to the public investors will not go unpunished.  Thus, the executives are placed in a position where they must personally responsible for the financial statement.  Furthermore, the certification by CEOs and CFOs require more time and diligence from all members of the company including auditors and senior accounts to put more efforts into reviewing the financial statements.  If in any case where “misconduct” activity is suspected, then CEOs and CFOs can be forced to lose any bonuses or profits from selling company stock in one year period (NACUBO, 2003). Before the SOX Act, most CEOs and CFOs usually do not take personal responsibility for the financial statement so they simply just signed it instead of spending time to review it carefully (Maroney &McDevitt , 2008).  With this act, they are required to establish, maintain, and continuously monitoring as well as evaluating the effectiveness of the company’s financial disclosure and procedures.  By certify the quarterly or annual report, CEOs and CFOs agreed to the accuracy and fair presentation of the report and basically certify that they have reviewed the report to the best of their knowledge, does not contain any untrue statement or omit any important and necessary information such as financial data and statements (Fordham International Law...

References: Fordham International Law Journal (2003). Regulation Without Borders: The Impact  of Sarbanes-Oxley on European Companies. Accessed November 11, 2013, from   < http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=1931&context=ilj>
GARP (2013). Sarbanes-Oxley Has Affected Internal Controls and Compliance: A 10th     Anniversary Review. Accessed November 11, 2013, from <
http://www.garp.org/risk-news-and-resources/2012/august/how-sarbanes-oxley-has-    affected-internal-controls-and-compliance.aspx>
Maroney &McDevitt (2008). Behaviorial Researching in Accounting. The Effects of     Moral Reasoning onFinancial Reporting Decisions in aPost Sarbanes-Oxley     Environment. Accessed November 11, 2013, from    
NACUBO Advisory Report (2003).  The Sarbanes-Oxley Act 2002. Accessed November     11, 2013, from
SEC (2013). SEC (2013). Sec Implements Internal Control Provisions of Sarbanes-Oxley     Act; Adopts Investment Company R& D Safe Harbor. Accessed November 11,     2013, from
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