Sox presentation By DSA
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The Sarbanes-Oxley Act (SOX) was passed in 2002 in response to major corporate accounting scandals to improve financial disclosure and transparency for public companies. Major sections of SOX include requirements for CEOs and CFOs to certify financial reports, for companies to establish internal controls on financial reporting, and to promptly disclose material changes. While SOX increased compliance costs for companies, it also aimed to restore investor confidence by improving accuracy of financial reporting and imposing penalties for violations. However, some critics argue that SOX places unnecessary regulatory burdens on companies.
Sox presentation By DSA
- 1. Sarbanes-Oxley Act “SOX” 'Public Company Accounting Reform and Investor Protection Act' Presented By: Daniyal Shahid Arain 111122
- 2. Agenda SOX I. Background II. Reasons III. Major Sections IV. Implementation Cost V. Benefits to Investor VI. Benefits to Company VII. Penalties VIII.Criticism WABILITY Knowledge & Experience
- 3. Background Background The Sarbanes-Oxley Act of 2002: Created by US Senator Paul Sarbanes (DMaryland) and US Congressman Michael Oxley (R-Ohio) Signed into law July 30, 2002 Has usher d in changes to corporate governance that rank among the most sweeping in history. Developed in response to recent corporate accounting scandals. Aimed at improving the transparency and accuracy of financial accounting of publicly traded companies. WABILITY Knowledge & Experience
- 4. SOX Basics Sox Basics Enron, Worldcom, Tyco Accounting Scandals Public Markets Decline Congress Respond Sarbanes Oxley Act Public Markets Decline Significantly Public Call to Restore Investor Confidence Act Passed WABILITY Knowledge & Experience
- 5. SOX Basics Law Happens WABILITY Knowledge & Experience
- 6. The ACT Sarbanes-Oxley: The Act Section 302 -CEOs and CFOs to sign off on the validity and accuracy of their companies’ financial numbers and to certify the controls and procedures behind their financial reports. Section 404 -Organizations must ensure that the audit process behind their financial reporting is not only comprehensive and accurate, but that they can also meet strict quarterly timeframes for reporting on an ongoing basis. WABILITY Knowledge & Experience
- 7. More SOX Sarbanes-Oxley: The Act Section 409 -Issuers are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. Section 802 -Imposes penalties of fines and/or up to 20 years imprisonment for altering, destroying, mutilating, concealing, fals ifying records, documents or tangible objects with the intent to obstruct, impede or influence a legal investigation. WABILITY Knowledge & Experience
- 8. Questions SOX- Act Section Key Questions for Executives Responsible for the Compliance Section 302 Who in the organization is responsible for ensuring the integrity and always-on status of finance and accounting systems? Section 404 Section 409 Does the internal controls framework include business continuity planning and disaster recovery considerations? How will potential “material changes” be monitored when the systems conducting the monitoring go offline? WABILITY Knowledge & Experience
- 9. SOX Costs Sarbanes-Oxley: Average Cost Of Implementation The Government estimates: $125,000 per Company (Small) $391,000 per Company (Large) CFOs estimates: $225,000 (Small Company) $3.14 million (Large Company) The Trade Group Financial Executives Survey’s final results: $291,000 per Small Company $4.36 million per Large Company WABILITY Knowledge & Experience
- 10. SOX Benefits to Investors Benefits to Investors Companies have to reveal poor financial reporting practices that should be stopped. More trust in the financial statements of any company before deciding on any investments. WABILITY Knowledge & Experience
- 11. SOX Benefits to Companies Benefits to Companies Benefits from consolidated data store Benefits from ability to find data and create reports – business intelligence Side benefit: discovery of internal fraud and theft through tighter controls Result: positive shareholder value WABILITY Knowledge & Experience
- 12. Penalties Penalties Action Punishment Reference “Knowingly” altering, destroying, or falsifying documents in an effort to impede, obstruct, or influence an investigation Fines up to $15 million and/or Imprisonment up to 20 years Title VIII, Sec. 802 Securities Fraud Fines and/or imprisonment up to 25 years Title VIII, Sec. 807 Mail and Wire Fraud Imprisonment up to 20 years Title IX, Sec. 903 “Willfully” certifying financial reports that do not meet regulatory requirements Fines up to $5 million and/or Imprisonment up to 20 years Title IX, Sec. 906 Violating SEC regulations May be ineligible to hold a director or officer level position at any publicly traded company Title XI, Sec. 1105 WABILITY Knowledge & Experience
- 13. SOX-Criticism • • Many Credible Personalities have contended that SOX was an unnecessary and costly government intrusion into corporate management that places U.S. corporations at a competitive disadvantage with foreign firms, driving businesses out of the United States. These regulations are damaging American capital markets by providing an incentive for small US firms and foreign firms to deregister from US stock exchanges WABILITY Knowledge & Experience