SARBANES OXLEY ACT

The Sarbanes Oxley Act was passed in 2002 and came into effect in response to major accounting scandals such as Enron. The Act was intended to restore the public’s confidence in the accounting profession and in the stock market. Sarbanes Oxley Act Section 802 pertains to corporate and criminal fraud accountability.

The section imposes penalties of up to ten years imprisonment for accountants who knowingly and willingly violate the maintenance or review papers of an audit (Sarbanes). The section also imposes fines and imprisonment up to twenty years for knowingly destroying documents or falsifying records that impend a legal investigation (Sarbanes).

 The strict fines and penalties help to detour accountants and business employees from participating in fraud and other illegal activities. There are also many other parts of the Sarbanes Oxley Act that help protect investors and minimize corporate fraud. CEO’s and CFO’s are required to personally certify the accuracy of financial reports (Bumgardner, 2019).

 CEO’s and CFO’s that partake in falsifying statements also face strict penalties, up to ten years for knowing and up to twenty years if willing (Bumgardner, 2003). I think this part of the Act was in response to scandals such as Enron and Worldcom. The CEO’s and CFO’s of those corporations that participated in fraud were made examples of, but to keep CEO’s from participating in these frauds they made a law to detour them and to keep these type of people from having the legal defense of not knowing.

Also to protect investors in these cases of fraud, any public company that makes a required restatement due to misconduct, the CEO can be forced to forfeit any bonuses or profits gained from selling company stock for a one year period ( Bumgardner, 2019). The Sarbanes Oxley Act also requires all material off the balance sheet transactions and special purpose entities be disclosed in annual and quarterly financial statements (Bumgardner, 2003). Previous to th