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    Highlights of Sarbanes-Oxley Act of 2002

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    The Sarbanes-Oxley Act of 2002 aimed to improve corporate responsibility and financial disclosures of public companies. It established oversight of public accounting firms, required independence of auditors from clients, and enhanced disclosures of material financial adjustments. The Act also addressed conflicts of interest for securities analysts and increased criminal penalties for destruction of records, failure to maintain audit work papers, and other forms of corporate and accounting fraud.

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    Highlights of Sarbanes-Oxley Act of 2002

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    The Sarbanes-Oxley Act of 2002 aimed to improve corporate responsibility and financial disclosures of public companies. It established oversight of public accounting firms, required independence of auditors from clients, and enhanced disclosures of material financial adjustments. The Act also addressed conflicts of interest for securities analysts and increased criminal penalties for destruction of records, failure to maintain audit work papers, and other forms of corporate and accounting fraud.

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    The Sarbanes-Oxley Act of 2002 aimed to improve corporate responsibility and financial disclosures of public companies. It established oversight of public accounting firms, required independence of auditors from clients, and enhanced disclosures of material financial adjustments. The Act also addressed conflicts of interest for securities analysts and increased criminal penalties for destruction of records, failure to maintain audit work papers, and other forms of corporate and accounting fraud.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    169 views2 pages

    Highlights of Sarbanes-Oxley Act of 2002

    Uploaded by

    paps3535_29555442
    The Sarbanes-Oxley Act of 2002 aimed to improve corporate responsibility and financial disclosures of public companies. It established oversight of public accounting firms, required independence of auditors from clients, and enhanced disclosures of material financial adjustments. The Act also addressed conflicts of interest for securities analysts and increased criminal penalties for destruction of records, failure to maintain audit work papers, and other forms of corporate and accounting fraud.

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    Highlights of Sarbanes-Oxley Act of 2002

    Sarbanes-Oxley Act of 2002 is named after its authors Senator Paul S Sarbanes and
    Congressman Michael G Oxley and has been enacted to improve the corporate
    responsibility among American firms. Major concerns that were addressed:
    To oversee the audit of public companies which are subject to the securities laws;
    To establish audit report standards and rules;
    To inspect, investigate, and enforce compliance on the part of registered public
    accounting firms, certified public accountants, and their associated persons.

    The major provisions of the Act


    Independence of auditors: Amendment to the Securities Exchange Act of 1934 to
    prohibit an auditor from performing specified non-audit services simultaneously with an
    audit. The non-audit services that are not expressly forbidden by this Act can be
    undertaken only after prior approval by the audit committee of the issuer.
    Corporate Responsibility: Confers responsibility upon audit committees of public
    companies for the appointment, compensation, and oversight of any registered public
    accounting firm employed to perform audit services. An audit committee member has to
    be
    member of the board of directors of the issuer ;and
    to be independent otherwise.
    Enhanced Financial Disclosures: The financial reports filed with the SEC must disclose
    all material correcting adjustments that have been identified by a registered public
    accounting firm in accordance with SEC rules and generally accepted accounting
    principles (GAAP).
    Analyst Conflicts of Interest: It requires the SEC to adopt rules governing securities
    analysts' potential conflicts of interest, including:
    restricting the prepublication clearance or approval of research reports by persons
    either engaged in investment banking activities, or not directly responsible for
    investment research;
    limiting the supervision and compensatory evaluation of securities analysts to
    officials who are not engaged in investment banking activities;
    prohibiting a broker or dealer involved with investment banking activities from
    retaliating against a securities analyst as a result of an unfavorable research report
    that may adversely affect the investment banking relationship of the broker or
    dealer with the subject of the research report;
    establishing safeguards to assure that securities analysts are separated within the
    investment firm from the review, pressure, or oversight of those whose
    involvement in investment banking activities might potentially bias their
    judgment or supervision;
    Directs the SEC to adopt rules requiring securities analysts and broker/dealers to
    disclose specified conflicts of interest.

    Commission Resources and Authority: Authorizes appropriations for FY 2003 to the


    SEC for:
    Additional staff compensation;
    Enhanced oversight of auditors and audit services; and
    Additional professional staff for fraud prevention, risk management, market
    regulation, and investment management.
    Studies and Reports: Mandates a GAO report to Congress on:
    the factors leading to the consolidation of public accounting firms and the
    subsequent reduction in the number of firms providing audit services to
    businesses subject to the securities laws; and
    the impact of such consolidation upon the capital formation and securities
    markets.
    Corporate and Criminal Fraud Accountability: Corporate and Criminal Fraud
    Accountability Act of 2002 - Amends Federal criminal law to impose criminal penalties
    for:
    Knowingly destroying, altering, concealing, or falsifying records with intent to
    obstruct or influence either a Federal investigation or a matter in bankruptcy; and
    Auditor failure to maintain for a five-year period all audit or review work papers
    pertaining to an issuer of securities.
    White-Collar Crime Penalty Enhancements: White-Collar Crime Penalty
    Enhancement Act of 2002 - Amends Federal criminal law to:
    establish criminal penalties for attempt and conspiracy to commit criminal fraud
    offenses; and
    increase criminal penalties for mail and wire fraud.
    Corporate Fraud Accountability: Corporate Fraud Accountability Act of 2002 Amends
    Federal criminal law to establish a maximum 20-year prison term for tampering with a
    record or otherwise impeding an official proceeding.
    Ref: http://levin.senate.gov/issues/corpresp_act.htm

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