Question 26Q - Intermediate Accounting (Kieso)

Question

The Sarbanes-Oxley Act was enacted to combat fraud and curb poor reporting practices. What are some key provisions of this legislation?

Step-by-Step Solution

Answer

Some of the key provisions of the legislation include: 

• It is essential for CEO and CFO to review all financial reports.
• Financial report does not include any misrepresentations. 
• Fair representation of information in the financial report.

Meaning of Fraud

When a culprit intentionally commits any immoral act to harm someone in monetary terms, then such activity is called fraud. Various laws and rules are implemented to protect society from these fraudulent activities.

Key provisions of the legislation

Some of the key provisions of legislation include:

• CEO and CFOs are required to verify the accuracy and completeness of financial statements and disclosures as well as forfeit bonuses and profits in case of restatement of accounts.
• It is also necessary that the audit committees should include independent members and members with financial expertise.
• Code of ethics is necessary for senior financial officers.
• Stronger independence rules are implemented for auditors, and
• An oversight board is set up for accounting practices.