The SOX checks and upgrades the accuracy of final statements. It emphasizes the basic accounting concepts and what should be included and what should be left out of the reports and in which time frame. There are 11 major sections in the SOX which include corporate responsibility for financial reports (Section 302), disclosure of financial reports (Section 401), management assessment of internal controls (Section 404), and also a basic structure of penalties for perpetrators of the SOX. Also, it establishes criteria for reporting relating to financial transactions, signatures and approval of the Chief Executive Officer or the Chief Financial Officer, and fiduciary duties of company heads and forbids loans to the directors.
The auditors are investigated by the Public Company Accounting Oversight Board (PCAOB) a body set up through the SOX. PCAOB looks out for breaches and has the authority to cancel or suspend a firm’s license and can also punish the accounting firm for any unlawful or unethical conduct (SOX, 2006).
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