Much controversy provider of Sarbanes-Oxley Act (the “Act”) 2002 enacted into law by then-President George W. Bush July 30, 2002, had the law been heralded as a giant step toward reform ills immodestly behavior problems major companies after the collapse of Enron, WorldCom and Tyco. Ten years later, the law has become one of the most controversial issues in MBA school and now, in the current presidential race.
The dramatic climax of the Act was to shed light on the harmful corporate behavior in various places. It was too much activity going on behind the scenes and the Security Exchange Commission seemed to allow this issue to go unnoticed. A plethora of problems blew up and got out-of-control. President Bush’s response to public demand greater responsibility in publicly traded organizations was to clamp down on corporate responsibility, accounting and auditing. The law imposes stricter rules on how companies do business through regulations in all these areas, except for tax compliance.
CEO and CFO are now required to certify appropriate interim by having them reviewed. While this is all well and good, the reality is that what was happening was the fox was guarding the hen house and no one was watching Fox. Symbiotic relationship between corporations and their accounting firms had become too cozy. The accounting firms began to play “I’ve got your back,” to keep the business companies’, only now control more than before.
New standards created a control board to monitor auditors and determine the auditor’s independence came to the fore. New standards for audit reporting companies under the Act accompanied by condemnation encryption independent auditors from other than tax services, to provide multiple services to audit. To effectuate this was mandatory audit firm rotation applied.
Two provisions of the law require management companies to certify periodic reports filed with the SEC. The rules require the CEO and CFO’s of each reporting company to certify periodic reports filed with the SEC. The US Criminal Code was amended as each periodic report on the financial statements must be accompanied by certification of the CEO and CFO of the company.
person who files a defective certification know that the periodic report of section 906 does not comply with all the requirements can be fined up to $ 1 million, imprisonment for not more than 10 years, or both. Wilful, and in conjunction with the necessary scienter witness any statement in Section 906 certification know accompanying report does not comply with all the requirements of Section 906 will be fined not more than $ 5,000,000 in jail not more than 20 years, both. A violation of the law will also break the Exchange Act. Under Section 906 certification, if done intentionally officers be prosecuted for criminal offenses under Section 32 of the Exchange Act which provides for fines of up to $ 5,000,000 and imprisonment for up to 20 years.