The Sarbanes-Oxley act was a mastermind of senator Sarbanes and a representative known as Oxley. The basic of the Sarbanes-Oxley Act was to give fortification to potential and existing investors by improving the accuracy and reliability of company disclosures prepared pursuant to the securities laws, and for other purposes. The Sarbanes-Oxley Act formed fresh principles for corporate liability as well as new penalties for acts of transgression. It changes how company boards and executives must interrelate with each other and with corporate auditors. The Act specifies new fiscal treatment responsibilities, including observance of new internal controls and procedures designed to ensure the validity of their financial records.
The Act requires all fiscal reports to take account of an internal control details. This is intended to show that not only are the company's financial data are precise, but also that the company has confidence in them since ample controls are in place to look after the financial data. The year-end financial reports have to include an evaluation of the efficiency of the internal controls. I addition, the issuer's auditing firm is obligatory to attest to that evaluation.
The US Sarbanes-Oxley Act was conceded when there were a myriad of corporate scandals. What these scandals had in common was distorted reporting of preferred monetary dealings. The main aim of the Sarbanes-Oxley is to augment corporate supremacy and reinforce corporate accountability. It fulfils all that by formalizing and intensifying internal checks and balances within corporations that usually institute diverse new levels of control and a sign-off intended to guarantee that financial reporting exercises complete disclosure and corporate governance is transacted with full lucidity.
Usually, non compliance penalties range from the minor loss of exchange listing to loss of D&O insurance to more expensive dollar fines or even imprisonment. It can also lead to lack of investor assurance. SOX applies to all public companies in the U.S. and global companies that have interests in equity or debt securities with the Securities and Exchange Commission and the accounting firms that offer auditing services to them.