The Sarbanes Oxley Act ( Sox ) Essay
The Title IV of SOX is comprised of 9 provisions, in which the primary focus is to improve financial disclosures.
Section 401 of the law necessitates that companies should provide financial statements that adhere to GAAP and shows “all material correcting adjustments established by the auditing firm.” In addition, financial reports produced quarterly or annually must report “all material off-balance sheet undertakings, arrangement obligations, and other relationships with unconsolidated entities that have an impact or eventual impact on the financial health of the issuer.” In so doing, the Securities and Exchange Commission (SEC) will release guidelines and regulations to ensure that the pro forma financial information will not be misrepresented, misleading, or misstated. More so, the SEC will examine the reported off-balance sheet to identify the range of off-balance sheet transactions and determine if the economics of such off-balance sheet transactions are clearly manifested on the issuer 's’ financial statements.
According to the provision under Section 402 of SOX, issuers are prohibited to protract, by any form and means, the credit to any executives or directors of that issuer. In section 403 of the law, officers, directors, and principal shareholders are given a deadline on when to disclose specified transactions.
Of all the provisions, Section 404 is possibly the most controversial. This part of the law…