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Finance & Accounting
Pages 3 (753 words)
Name: Instructor: Course: Date: Sarbanes Oxley Act The Sarbanes Oxley Act was an act that was passed by the Congress in the United States of America in 2002. It was signed into law on 30th July 2002 (Prentice 2). The act was passed with the sole aim of protecting investors from the risk of fraudulent accounting actions by corporations.
In the US, the Sarbanes Oxley Act is a federal law that was established to enhance standards for all public accounting firms, management firms and public company boards. The Sarbanes Oxley Act got its name from its two main sponsors and architects, namely, Michael Oxley who was a US Representative and Paul Sarbanes who was a US Senator (Kohn, Kohn & Colapinto 12). The Sarbanes Oxley Act requires the top management of public companies to personally ensure the accuracy of any financial information relevant to their companies. The Sarbanes Oxley Act of 2002 is obligatory and legally binding (Kohn, Kohn & Colapinto 23). All organizations are required by the law to comply with it, regardless of their sizes. The act is lauded for having introduced major changes to the regulation and standardization of corporate governance and financial practices in the US. Stringent new rules and highly significant legislative changes were introduced to protect investors. The act also aimed at improving the reliability and accuracy of corporate financial disclosures (Shakespeare 333). Accounting and corporate scandals had become very common across the United States (Prentice 4). These scandals were costing investors a lot of fortune, especially at the collapse of share prices of the affected companies. ...
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