Name: Edmalyn R.

Canton – BSA 1 – BE 302 Morning

Course/code: 893 – ACCPB 100

PART 2 Essay

A. Discuss how Sarbanes-Oxley Act of 2002 was passed and the reason of its
creation.

B. Discuss its importance (SOX Act of 2002) in present times.

Sarbanes-Oxley Act 2002 (SOX 2002) is a federal law in United States (US)
Congress was signed by US President George W. Bush on July 30, 2002 to help protect
investors from fraudulent financial reporting by its corporations. By the virtue of law,
aims to enhance accuracy of corporate disclosures, corporate governance, and
accountability and it implies strict new rules for accountants, auditors, and corporate
officers and imposed more stringent recordkeeping requirements. This act was authored
by U.S. Congressmen Paul Sarbanes and Michael Oxley.

Citing Article 3, section 302 of Corporate responsibility for financial reports, this
financial statements must certify that: the documents have been reviewed by signing
officers and passed internal controls within the last 90 days. The documents are free of
untrue statements or misleading omissions. The documents truthfully represent the
company’s financial health and position. The documents must be accompanied by a list
of all deficiencies or changes in internal controls and information on any fraud involving
company employees.

So, in every entity or corporations must publish a detailed statement in their

yearly financial reports to explain the structure of internal controls used. The data must
also be must be evident regarding the procedures used for financial reporting. The
statement should also weigh the effectiveness of the internal controls and reporting
procedures. The accounting firm auditing the statements must also assess the internal
controls and reporting procedures as part of the audit process. SOX changes
management's responsibility for financial reporting. It requires that top managers
personally endorsing accuracy of financial reports. This law tackles not just only
accountability, it also includes management and ethics in a corporate world. It relates
aftermath from corporate misconduct and scandals including retaliation against
whistleblowers.

For more than decade, SOX has been relevant and successful in changing the
landscape of corporate governance to the benefit of investors. It has increased investor
confidence and the accountability expectations investors have for corporate directors
and officers, and for their legal and accounting advisers as well.

Hence, SOX Act of 2002 makes corporations liable for accuracy and fairness and
up to date reporting of financial data. The cost of implementing SOX requirements are
high, but the benefit of investor’s confidence is higher. There are going to be some
situations where fraud is foreseeable.