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The Sarbanes Oxley act: After the financial scandals and the subsequent bankrupcy of several big companies like Enron and Worldcom, a relatively new concept emerged in the business world:�compliance� is the regulation of financial information and the most significant effort in this context is the Sarbanes Oxley act which was developped by two US congressmen Paul Sarbannes and Mickael Oxley in 2002. The official name of this act is public company accounting reform and investor protection act of 2002, but it is commonly called SOX. The act increases the personal responsibility and liability of the top and senior management of public companies regarding the accuracy and reliability of the financial reporting. The main recommendations of the SOX act are: * The financial reports have to be certified by CEOs and CFOs * Personal loans to any Executive Officer and Director is banned * Reporting of insider trading has to be done very quickly * The CEO and CFO's compensation have to be disclosed to the public * The act stresses on the Auditor's independence * Violations of securities law are subject to legal sanctions * The jail sentences and fines for corporate executives who knowingly and willfully misstate financial statements are significantly increased * The act prohibits audit firms from providing extra services to their clients, such as consulting, unrelated to their audit work. * Public companies are required to deliver independent annual audit reports on the existence and reliability of internal controls related to financial reporting. The management of a public company has also to regularly do internal controls and report these procedures (SOX 404). Since most of today's companies rely on IT to gather and manage the accounting and financial information, the act has established specific controls for the reliability of the IT chain. The following link include the full original text of the SOX act: http://www.legalarchiver.org/soa.htm 08/12/05 Imad Karam |
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