Section 404 requires corporate executives to personally certify the accuracy of their company's financial statements and makes them individually liable if the SEC finds violations. Section 404 deals with "Management Assessment of Internal Controls" and requires companies to publish details about their internal accounting controls and their procedures for financial reporting as part of their annual financial reports. Financial disclosures must contain reporting of material changes in financial condition. The Act requires year-end financial disclosure reports and that all financial reports come with an Internal Controls Report. This section also established that CEOs and CFOs are responsible for internal accounting controls. Section 302 pertains to "Corporate Responsibility for Financial Reports." It established, in part, that CEOs and CFOs must review all financial reports and that the reports are "fairly presented" and don't contain misrepresentations. Two sections of particular note are Section 302 and Section 404. The Sarbanes-Oxley Act is arranged into 11 sections, or titles. The Act enhanced accounting compliance regulations to keep such a scandal from occurring again. In this case, the company's former CEO and CFO were convicted of stealing hundreds of millions of dollars from the company, falsifying business records and violating other business laws. The financial scandal at Tyco International also preceded the Act.Its chief executive officer ( CEO) was sentenced to 25 years in prison, and the chief financial officer ( CFO) received a five-year jail sentence as a result of criminal charges in the case. After filing for bankruptcy in 2002, the company was hit with a $750 million SEC fine. Similarly, the telecommunications giant WorldCom became embroiled in scandal as its own fraudulent accounting practices made the news.Around 2000, Enron unraveled in less than two years as both the company's fraudulent practices and its executives' criminal activities came to light.Enron was considered one of the largest, most successful and innovative companies in the United States. One such scandal involved energy firm Enron Corp.
![false statement certification sarbanes oxley convictions false statement certification sarbanes oxley convictions](https://image.slideserve.com/172828/title-ix-white-collar-crime-penalty-enhancements-l.jpg)
Bush, who signed the act into law on July 30, 2002, called the act "the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt."įederal lawmakers enacted the Sarbanes-Oxley Act in large part due to corporate scandals at the start of the 21st century. The legislation sought to both improve the reliability of public companies' financial reporting as well as restore investor confidence in the wake of high-profile cases of corporate crime. Compliance with the Act is about financial disclosure and corporate governance. However, some provisions apply to all enterprises, including private companies and nonprofit organizations.Īdditionally, the Act established penalties for noncompliance with its provisions. The Act primarily sought to regulate financial reporting, internal audits and other business practices at publicly traded companies. The main areas that the Act is focused on are: These rules were amendments and additions to several laws enforced by the Securities and Exchange Commission ( SEC), including the Securities and Exchange Act of 1934 and the Investment Advisers Act of 1940. Auditors, accountants and corporate officers became accountable for the new set of rules. Lawmakers created the legislation to help protect shareholders, employees and the public from accounting errors and fraudulent financial practices. The Sarbanes-Oxley Act of 2002 is a federal law that established sweeping auditing and financial regulations for public companies.