Now, many people from different backgrounds investing in various fields. The stock market plays an important role in the current economy. It is used for companies to check the balance system of the business. Sarbanes Oxley Act is a federal law established for regulations of financial practice and corporate governance. It created to protect employees, shareholders, and the public from financial practice and accounting errors.
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It strengthens financial literacy and independence of the corporate sector. The Sarbanes Oxley Act (SOX) created to give protection to workers. It is the authority to increase corporate governance, documentation of corporate internal controls, auditor independence, and financial disclosures. The main intention of the act is to protect the public and investors against corporate fraud. It holds corporate accountable like public accounting companies, CFOs, CEOs, and boards of directors who work with public firms
Importance of SOX:
Investors have to provide internal control structure and financial statements of the company. CFOs and CEOs have to clarify annual reports and financial statements. It protects important data of company which create financial records. Here you see key points of SOX
To generate and prove the accuracy of financial statements, validation of the financial system, impose controls of the company.
Without pre-approval of PCAOB, Public accounting companies who offer to audit are prevented from offering stock valuation or bookkeeping services.
PCAOB (public company accounting oversight board) introduced as a nonprofit organization to independent reporters, auditing companies, train auditors, and supervise auditors.
CFO and CEO have to check financial data based on the financial condition of the organization. Otherwise, they have to pay penalties.
The auditor needs to report all financial practices and accounting policies to the audit committee.
Benefits of SOX:
After the implementation of the law, accounting fraud and financial crime become less. Investors gain more benefits from the act. It protects workers to report financial fraud of the company. The act helps organizations avoid requirements of SOX and SEC registration. It allows traders to trade with securities. Employees can report fraud to health administration and occupational safety. It adds expenses of the external auditor, directors, legal advice, and productivity of audits.
It is very useful for mid-level workers and managers to report and pass certification to the company. Also, it is used to review audit requirements and protect investors with increasing accuracy of disclosures. It is designed for financial professionals to see financial reports. It helps investors to keep auditing procedures and restrictions. Investors make a corporate statement accurate with the act. They can avoid complications in auditing financial reports of the organization.
In the above following content, you will learn the requirements and how you comply with this act. It holds CEOs responsible for the financial document of the company. It restored auditing quality and boosts the confidence of investors in US firms.