Essay on Sarbanes-Oxley Act Compliance

An essential aspect observed in a publicly traded company is the need to be transparent to all the shareholders of the company. Therefore, complying with the provisions of SOX ensures that the company is in line with all the necessary legal procedures and incorporates significant modifications to the corporate body in relation to its financial practices and regulations.

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The company needs to uphold the provision of section 302 of SOX that necessitates presentation from the CEO and CFO of certificates of reports annually and quarterly periodic. Therefore, the company should concern itself with the preparation of Form 10-k or 10-Q and the board should ensure that the report does not exhibit oversight or misstatement of materials. The financial statements should reflect all business operations, and there should be a fair presentation of data. Further, the CEO and CFO are accountable for designing disclosure controls and processes in relation to the business operations and business communication platforms, so as to ensure that the needed information is collected and reported punctually in Form 10-K and the Form 10-Q.

At this point, there should be the inclusion of ICFR to evaluate if the company and the executives are operating effectively and if the company makes any material changes or fraudulent actions involving the organizations ICFR it should be disclosed. To ensure accurate and timely preparation of the reports the CEO and CFO should establish communication platform with the external audits and audit committee on all weaknesses of the materials or deficiencies in ICFR or fraud deeds by persons connected to ICFR. Therefore, section 302 of SOX authorizes the senior executives of the public firm to verify that the internal controls are well-established, preserved, and proficiently designed so as to deliver the accuracy of a companys data outlined in the organizations periodic reports.

On the management segment of the firm, the managers should ensure that they comply with section 404 of SOX that focuses on the management and the external auditors of the enterprise. In this perspective, the management should have an opinion on the internal control of the company in relation to the financial data reported to ICFR. The ICFR body plays a significant role in monitors the company's procedures and balances to ensure that the financial statements are accurate and presented in a fair manner. Hereby, the firm is required to put an enormous amount of efforts in identifying its essential controls and strictly ensuring that the operations are conducted with efficacy. It's impossible for the company to avoid testing of its operations because it is the only approach that can be used for the company to evaluate and reveal the proficiencies to its ICFR (Kaarst, 2005).

In order to implement its strategies properly the company will need to employ additional workers and in relation to the operations of the company it may also find the need to buy additional financial recording systems. It is also important for the public traded company to ensure that their ICFR is audited by a self-governing firm. However, there is an exemption to this perspective in that if the organization acquires a public float of $ seventy-five million or less or not having accelerated filers and has EGCs of up to five years time. In this case scenario, the company plans to go public since it is new it is not necessarily required to give out the management evaluations on ICFR up to the second annual period whereby it files its report with SEC. Therefore, section 404 of SOX mandates the external auditors and the companys management to adequately report on all internal controls over the organizations financial reports.

Section 401 of SOX requires the company to disclose all of its annual and annual reports. This is by ensuring the financial reports are accurately prepared. The financial statements should be prepared or reconciled according to the accounting principles and reflecting and materials adjusted and corrected. Further, the financial statements may incorporate the off-balance sheet transactions, liabilities, and obligations. These financial reports should be presented to the Commission so as to analyze and report on the extensiveness of the off-balance dealings thus delivering transparency in reporting of the financial reports. In addition, the Commission should determine whether the accounting principles that are acknowledged and other regulation deliver open, accurate and meaningful presentation by the company (Breslin, 2006).

The company has its responsibility towards the public once it becomes a public traded company. Section 409 of SOX ensures that it accomplishes these duties by requiring adequate disclosure to the public on matters concerning urgency, any modifications or alterations of data in their financial operations or circumstances. These disclosures are to be reported to the public in terms and manner that is easy to comprehend and should be supported by quality data by use of appropriate graphical presentations, and deliver information that is trendy. This ensures that they do not conceal critical or crucial information to the public who act as the shareholders, stakeholders, customers and the community that surrounds the company. Thus, by adhering to this section, the SOX ensures that the firm does not manipulate the public to deceitful actions and promotes peaceful co-existence between the company and the public.

Section 802 of SOX ensures that the company acts in line with the compliance provisions of SOX by imposing criminal penalties if the company chooses to report altered documents. The provisions of SOX under this section may impose penalties and placement of fines that can lead to imprisonment of up to twenty years for changing, concealing, destroying, falsifying, or mutilating of records or tangible materials with the intention of obstructing or influencing the legal investigation. It may also impose an imprisonment of up to 10 years for penalties on the accountants that fully acknowledge, willingly and recognizes the violations made on the necessities of maintenance of the complete audits. This section aims at disciplining the companies that violate any stipulations of Sarbanes-Oxley Act and ensures that they are in line with the legal mandates. Therefore, the company should observe all the compliance provisions of SOX in order to run smoothly and to avoid the extra legal expenses as a result of misconduct. The purpose of complying with these stipulations is to promote accuracy, transparency, and accountability in preparing financial reports and conducting of operations.

References

Kaarst-Brown, M. L., & Kelly, S. (2005, January). IT Governance and Sarbanes-Oxley: The latest sales pitch or real challenges for the IT Function?. In System Sciences, 2005. HICSS'05. Proceedings of the 38th Annual Hawaii International Conference on (pp. 236a-236a). IEEE.

Breslin, J., & Myatt, N. (2006). U.S. Patent Application No. 11/412,474.