The Sarbanes-Oxley Act of 2002 Essay Example | Topics and Well Written Essays - 500 words

The Sarbanes-Oxley Act of 2002 - Essay Example a) Independent and competent audit committee: The act requires the audit committee members to be a part of the board of directors. Also they need to be independent, i.e. not a part of the management and not receiving any compensation from the company either as an employee or even as a consultant. b) Responsibilities of Auditors: The act requires that the lead and reviewing partners of the audit firm are changed once every five years. The best way to do so is to change the auditing firm every five years. c) Certified Financial Statements: The Act states here that the chief executive and the CFO need to certify the appropriateness of the financial statements. Also, any false certification can give rise to liability. The Act also requires that none of the chief executives, i.e. CEO, CFO, Controller, or CAO, were a part of the auditing firm for one year preceding the audit, to ensure that there are no conflicts of interest. e) Disclosure: The Act requires a number of disclosures which include all information on internal control mechanisms, any corrections to the past financial statements, material off balance sheet transactions and also the material changes in operations or even the financial situation of the company. f) Whistle Blower Protection: The Act supports the whistle blowers and takes complete actions on any firm that might take any action against employees who report suspected illegal activities in the organization. g) Document Destruction: The Act considers the destruction of any litigation – related document or alteration, cover-up, falsification as a serious issue and especially if this is done to prevent the use of the documents for official proceedings (SOX law, 2003). The SOX Act can prove to be beneficial to the accountants as this allows the people to be more truthful and ensure that all books are in place. Also, with the various sections in place, it allows for protection of whistle