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The Sarbanes-Oxley act
The Sarbanes-Oxley act was given a node by the congress. The decision to bring this law into action was to protect the individuals who had interest in various firms from being duped. The congress was afraid of situations where shareholders and other citizens lost act was The Sarbanes-Oxley act was developed to help in reducing the mis-use of investors by fraudulent firms. This act was put into action to ensure that all those who invest do not fall prey of those fraudulent persons. It became evident to the authorities that many investors were being harassed by the several fraudsters who had entered the sector.
The governance principles of regulatory compliance requirements related to Sarbanes-Oxley Act
The Sarbanes-Oxley Act is based on several regulatory compliance requirements. The compliance requirements have been put in place to ensure that the act is well understood by ll the users. The users are presented with such guidelines to ensure that they do not stray from what the act advocates for. One of the regulatory compliance requirements gives guidelines on disclosure controls. The section that hands the control of disclosures is 302.
This section advocates that all liable officers should ensure that they state their role on coming up and maintaining internal control in a firm. Secondly, this section guides on how all responsible officers should indicate that the firm’s information has been passed to the relevant stakeholders. This section also provides that all responsible officers should carry out analysis a of firm’s internal controls before making their reports.
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The other governance principle of regulatory compliance requirements related to Sarbanes-Oxley is improper influence on conduct of audits. This guideline is under section 303 of the Sarbanes Act. This section of the Sarbanes-Oxley act was aimed at ensuring that the accountants and auditors did their job in the recommended manner. This means that the auditors were supposed to start shedding the bad professional habits that used to make shareholders lose their investments in companies.
According to the Sarbanes-Oxley act, the accountants were supposed to ensure that the reports produced were as the true and fair view in a company. This means that the accountants were supposed to report business operations as they truly were. Regarding auditors, the Sarbanes-Oxley act stated that the auditors were supposed to ensure that their opinions are not compromised.
Section 404 of the Sarbanes act is the other regulatory guideline. This section states that the management should be able to produce a report that explains the level of internal controls in an organisation. This section is usually titled as the Sarbanes-Oxley act, section 404; the assessment of internal controls. Just like the requirement in section 302 for all signing officers to state their role in internal controls, section 404 stipulates that the management should state its responsibility when it comes to the internal controls of an organisation.
Under this section of the act, the management should be able to give a report that shows their assessment of the internal controls for all fiscal years.
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The role of the SEC and how Sarbanes-Oxley affected the agency
SEC refers to Securities and Exchange Commission. According to Kohn, Kohn and Colapinto, (2014), this is an agency in the United States f America which deals with companies whose shares are to be taken over by new owners. This commission ensures that there exists a smooth transition whenever there are takeovers of organisations. The smooth transition is usually aimed at ensuring that nobody ends up becoming aggrieved in the process of takeover. Basically, the introduction of the Sarbanes-Oxley Act was an added advantage to the SEC. This is because it brought about legislation that strengthened the policies SEC.
The Sarbanes-Oxley Act strengthened the enforcement of securities fraud and helped in the implementation of accounting reform. This was as a result of the Sarbanes-Oxley Act stating it clearly how all the officers in an organisation should be held liable regarding their actions. The guidelines brought about by the Sarbanes-Oxley Act have made all the professionals in audit and accountancy upholds high levels of integrity towards their work (Greg, 2015). The act has also made the management of organisations be in the forefront in ensuring that all the stakeholders are taken care of; most of all the shareholders.
Conclusion
Investors should always be protected by the authorities. This is why the congress came up with the Sarbanes-Oxley Act which was aimed at offering such protection. All the professional bodies should be able to monitor its members. This monitoring will be able to identify the rogue members and remove them from their recognition. This will be a move that will take all professionals towards discipline that protects corporate and the shareholders. It is advisable for the authorities to keep on improving the guidelines and principles that this act is based on.
This will be able to tighten any loose ends that might start developing as the targeted individuals discover new tricks. The review of the guidelines and principles will enable the act capture contemporary issues related to business operations and securities in general. According to Thompson (2014), shareholder protection strategies should always be incorporated in all legislation during reviews.
References
Greg, F. (2015). “America Robbed Blind.” Wizard Academy Press.
Kohn, S., Kohn, M. & Colapinto, D. (2014). Whistleblower Law: A Guide to Legal Protections for Corporate Employees. Praeger Publishers.
Thompson,JL. (2014). Understanding Corporate Strategy. Cengage Learning.
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