Jul 11, 2019 in Law

The Sarbanes Oxley Act

The Sarbanes–Oxley Act of 2002 is an act that was enacted in July 30th 2002, the act also known as the 'Public Company Accounting Reform and Investor Protection Act'(in the Senate) and 'Corporate and Auditing Accountability and Responsibility Act'(in the House). Commonly known as Sarbanes–Oxley (SOX) it sets new standard in all the United States of America Public Company boards, management and public accounting firms. The act was sponsored by two legislatures one who introduced the bill in the senate while the other legislatures introduced the bill in the House of Commons they were U.S. Senator Paul Sarbanes and U.S. Representative Michael G. Oxley that is suffixed as Sarbanes-Oxley Act or the synonymy SOX act.

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The bill was enacted to the house of representative and the Senate as a result of the increased numbers of corporate and accounting scandals; this is basically noted due to the failure of major corporations that were seen as the pride of the country. At the same time there were the major contributors in the economy growth of the united states of America big cooperates like Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom were affected by this scandals that costed the investors billions of dollars as the rates and prices of the shares. The collapse also shook the public confidence in the nation’s security markets; thus reducing the numbers of people who want to achieve and invest in the financial corporations.

The advantages of the Sarbanes-Oxley Act on the corporate

There are significant researches that have been conducted on monitoring the advantages of the SOX policy; some of the advantages include improvising of corporate transparency. This is when the companies look at the foreign firms that are cross listed in the United States; in addition, it becomes significantly more important in ascertaining the accountability of the firms.

The act also reduced the prices of shares in the markets this is because the act ensures that the financial earnings are well reported and this will ensure that the stock valuation of all the firms and consequently ensuring that the share are low priced. The act also introduced the reduction of the borrowing costs; which brought the improved internal control of the firms; this is by use of the between 50- 150 basis. This helps the organizations to be in a position of providing the public with the effective services that will ensure that they succeed. The act also improved internal controls of the companies and in the process it ensured that the financial statements of these companies are more reliable.

The act has also provided the whistle blowers with a guaranteed states security and job security in case of any unfair dismissal; in view of the fact that their position and contribution in the whistle blowing of the scandal to the public would enlighten the public but jeopardize their job. In this case the government will ensure that each of the whistle blowers are recommended and protected from any type of violation that will be aimed at infringing their rights. This is when the  government assures the whistle blowers of a guarantee of his/her job security and any form of compensation in the case of un fairly dismissal from the office.

Penalties to Chief executive officers (CEO’s) and chief financial officer (CFO)

The Sarbanes–Oxley Act of 2002 has stated that a person is considered guilty for this kind of crime when an individual knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or making a false entry in any record, documentation, or tangible objects with the intent of impeding, obstructing, or influencing the investigation or proper administration. This   involvement in a deliberate attempt is aimed at ensuring that the person involved in this case can be fined under this title or imprisoned to a jail sentence of not more than 20 years or both the charges.

The act has also indicated that any person that has an intent of retaliating, taking any unlawful action to any person which includes the interference of the lawful employment or livelihood of any person as a result of providing proper information to any law enforcing officer with truthful information that relates to the commissioner with any federal offence shall be fined or even sentenced to a sentence to prison of up to 10 years or both.

The other offence that is considered and can result to the jail sentencing of the Chief Executive Officer (CEOs) and chief Finance Officer (CFOs) is the failure of these official to audit maintain/update or even review the financial work papers of the company for an approximately duration of 5 years. For this they will be liable to a sentence of which includes a sentence of a fine or a sentence of 5 years imprisonment.

The other offence is when the CEOs and CFOs is reckless and violates his or her certification of the company financial statement (but willingly); for this CEO or CFO will be subjected to a fine of up to $ 1000,000 and /or a sentence of 10 years imprisonment or a fine of $ 5 million and/or 20 years imprisonment.

The other offence that the Chief executive officers (CEO’s) and chief financial officer (CFO) may face is when two or more persons conspire to commit an act of defrauding the government or its agencies will be subjected to a fine and/or a jail sentence of up to 10 years imprisonment.

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