1) In 2002 Wall Street was embroiled in a bear market as crorate greed and exces
ID: 2481320 • Letter: 1
Question
1) In 2002 Wall Street was embroiled in a bear market as crorate greed and excess was blamed for creating a huge stock market bubble that had burst in 2000. Congress responded by enacting The Sarbanes-Oxley Act of 2002.
a) How did Sections 302 and 404 address the public's concerns that corporate management be more accountable?
b) How about Section 906?
2) In 2010 the economy was mired in a deep economic recession as unemployment was high and capital for new business start ups was scarce. Many blamed government over regulation for the stifling of the economy and demanded government to stimulate economic growth.
How did Congressional amendments to Sarbannes Oxley in 2010 help loosen regulations on smaller publicly held companies?
Explanation / Answer
Under sections 302 of SOX act 2002 the emphasis is given on the keeping efficient internal control, this is done keeping in mind that some of the embezzlement can easily be passed through if internal control is weak. Internal control should be very efficient and its effciency has to certified by the officer who reviews it. If internal control is found breachable then it is an civil offence. Under sections 404 public address of whether the internal control is effcient or robust or not is judged. Efficiency of internal control is reviwed. External auditor need to publish the internal assessment report whether internal control of the company is robust or not, it should not be breachable. Management is alsi held responsible if internal control is not robust. The need of this section was there, because internal control can be made just for the sake of name and scams still can be passed through.
Under section 906 it is made very clear that if any scam and impropper action is found in financial statement or through any action through which public at large will be at loss. The highest officer in office that is chief financial officer and MD or GM or CEO should be held responsible. These officers have to give the statement about the content and accuracy of the financial statement. Breach of this section is an criminal offence.
Sox audit is an expensive audit in slowdown of 2008 onwards where unemplyemnt has risen up, congrss decided to loose its grip little bit on smaller companies. they gave the relaxation to the smaller companies that they dont need to provide extrernal audit assessment on internal control rather an assessment from their management would be sufficient. These extensions were given to curb the costing and giving a push to smaller business houses so that they can servive this slowdown and the opportunity of employment does not go further down.
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