Sarbanes Oxley Act 2002 Summary

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Sarbanes-Oxley Act (2002) Developed by U.S senator Paul Sarbanes and U.S representative Michael Oxley and enacted in 2002, the Sarbanes Oxley Act sought to delimit the increasing level of financial fraud. The sought enhance the accounting process by ensuring that the top management remained actively involved on an individual basis in the analysis and certification of the accuracy levels pertaining to company financial information. The Act was developed in an effort to reduce and consequently eliminate fraudulent financial activity incorporated by the accounting element in firms. The Act set up dire penalties pertaining to fraudulent financial activity, which was necessary following the Tyco International and WorldCom that led to the loss of billions in investor money as the financial scandals led to the depreciation of the share prices leading to consequent sock loss in…show more content…
The participants include the board of directors, managers, shareholders, creditors, auditors and stakeholders (Ramadhan, 2012). It further identifies the rules and procedures incorporated in decision making within corporate issues. Incorporation of corporate governance enhances the development of a structure that seeks to enhance proper achievement of organizational objectives through identification and incorporation of social, legislative, market and environmental aspects that directly affect the corporate functions of the organization. The adoption of the Act sought to ensure that businesses adopted high operational standards necessary in influencing the adoption of effective financial procedures that meet the stakeholder interests. Therefore, the adoption of the Sarbanes-Oxley Act within U.S. firms remained instrumental in ensuring that the firm meets the financial obligations of stakeholders through the adoption of the corporate governance
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