Question

What is the Sarbanes - Oxley Act and is it important?

Answer 1

The sarbanes-oxley Act was signed into the law on 30th july 2002, Its a federal law that established sweeping auditing and financial regulations for public companies. the law is implemented to protect shareholders, employees and the public from accounting errors and fraudulent financial practices.under the surbanes oxley act CEO's and CFO's must certify that an organizations internal controls are adequate as part of the organizations ethical compliance framework. Internal controls provide a framework for identifying and controlling the risk that exisit within an organization. They also can be used to assess the amount of risk to which an organization is exposed. Internal control that are in alignment with company values serve to strengthen the culture. At the same time , a vibrant ethical culture provides a strong foundation that compels employees to follow internal controls. Therefore an effective internal control system becomes an integral part of the organization culture.

Protection for Whistleblowers ( employees who identify ethically questionable behaviour by others with a confidential way to seek advice and report ethical violations) is another significant provision in the sarbanes oxley Act. SOX also created new requirements for corporate auditing practices. The proponents of the law acknowledged that sox helped businesses improve their financial management by strengthening controls, standardizing processes, improving documentation and creating stronger board oversight. Studies also have found that SOX increased investor confidence.