Category: Awards

Implications of Section 404 of the Sarbanes-Oxley Act

Adequate Internal Control Over Financial Reporting The provision under Section 404 of the Sarbanes-Oxley Act is considered to be the most controversial and the most challenging part of the Act. Section 404 obliges the external auditors and their client firms to disclose the efficacy and adequacy of the company’s internal control over financial reporting. Implementing Section 404 is not all about compliance. For the most part, realizing the regulations and policies under the provision will provide significant benefits to the company. These include enhanced effectiveness and competence of internal control practices, increased investor confidence, and more thorough information for investors.…

Implications of the Sarbanes-Oxley Act of 2002

Review of the Sarbanes-Oxley Act of 2002 In July 2002, the Sarbanes-Oxley Act (SOX) of 2002 was enacted in order to restore confidence in corporate financial statements. This was in response to the series of financial scandals that erupted involving large corporations and accounting firms. Under SOX, accounting firms, public companies, registered foreign corporations, and specified private companies are required to comply with the requirements and rules as sanctioned by the law. In most cases, the auditors were criticized and blamed for having a conflict of interest. Investigations showed that their income far exceeded what was supposed to be the…

Understanding the Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act or simply Dodd-Frank Act, is regarded as the most extensive financial reform since the rescinding of Glass-Steagall Act. Referred to as the Banking Act of 1993, the Glass-Steagall Act was legislated in order to avert the use of depositors’ funds by banks on precarious ventures like the stock market. In a manner similar to the Glass-Steagall Act, the Dodd-Frank Act aims to monitor and supervise financial markets so that financial crises such as the 2008 economic crunch won’t happen again. In addition, the Act is tailored to protect consumers through its…

Exploring Section 404 of the Sarbanes-Oxley Act of 2002

Introduction to Title IV of the Sarbanes-Oxley Act (SOX) The Title IV of SOX is comprised of 9 provisions, in which the primary focus is to improve financial disclosures. Section 401 of the law necessitates that companies should provide financial statements that adhere to GAAP and shows “all material correcting adjustments established by the auditing firm.” In addition, financial reports produced quarterly or annually must report “all material off-balance sheet undertakings, arrangement obligations, and other relationships with unconsolidated entities that have an impact or eventual impact on the financial health of the issuer.” In so doing, the Securities and Exchange…

Basics of Sarbanes-Oxley Act of 2002

Historical Timeline of Laws that Precedes Sarbanes-Oxley Act of 2002 In 1911, Kansas enforced a comprehensive securities law in response to agents that sell interests that had no financial backing. Several years down the line, the 1929 market crash acted as the turning point for the institution of preventive measures on business proceedings. Consequently, the Securities Act of 1993 was enacted. Through this, investors were required to thoroughly disclose their financial information and were prohibited from engaging in shady, fraudulent, and misleading business transactions, which involved securities. The implementation of the Securities Exchange Act of 1934 resulted to the formation…