Sarbanes-Oxley Act (Sox) 2002: CEOs & CFOs

The Sox Act in 2002 enhanced the responsibilities of the CEOs and CFOs by requiring them to certify the accuracy of the financial statements and making sure that there is no intention of fraudulence. Furthermore, they could significant penalties such as that they could face up to 10 years for â€Å"knowing† violations and up to 20 years if â€Å"willing† as well as criminal charges for certifying false information. In addition, they will be prohibited from holding corporate positions as directors or office in the future by the SEC (Fordham International Law Journal, 2003). The main purpose behind this is to make sure that any wrongdoing to the public investors will not go unpunished.Thus, the executives are placed in a position where they must personally responsible for the financial statement. Furthermore, the certification by CEOs and CFOs require more time and diligence from all members of the company including auditors and senior accounts to put more efforts into re viewing the financial statements. If in any case where â€Å"misconduct† activity is suspected, then CEOs and CFOs can be forced to lose any bonuses or profits from selling company stock in one year period (NACUBO, 2003). Before the SOX Act, most CEOs and CFOs usually do not take personal responsibility for the financial statement so they simply just signed it instead of spending time to review it carefully (Maroney &McDevitt , 2008).With this act, they are required to establish, maintain, and continuously monitoring as well as evaluating the effectiveness of the company’s financial disclosure and procedures. By certify the quarterly or annual report, CEOs and CFOs agreed to the accuracy and fair presentation of the report and basically certify that they have reviewed the report to the best of their knowledge, does not contain any untrue statement or omit any important and necessary information such as financial data and statements (Fordham International Law Journal, 2 003). The overall goal of SOX Act is to restore the confidence in investors when reviewing its financial reports because there is really no point of looking at it if it is inaccurate.The Sarbanes-Oxley Act of 2002 Internal ControlThis section addresses the problems and weaknesses in internal controls and  how public company methods to collect, process, and disclose financial information to satisfy its statutory reporting requirements. Recent corporate and accounting frauds have demonstrated the inadequacy of internal controls with regard to revenue recognition. The act also contains requirements aimed at ensuring proper revenue recognition (SEC, 2013). Under this section, there must be a statement of management’s responsibility for establishing and maintaining internal control for any financial report of the company.Furthermore, they must list out the frameworks on how they used to determine the effectiveness of the internal control. In addition, they must write an formal e valuation on the effectiveness as company’s recent fiscal year. Finally, an auditor has issued an attestation report on management’s assessment (SEC, 2013). Although initially the compliance costs and efforts of this act were burdensome but after many years companies feel that compliance of the act outweight the costs as well as a great improvement in internal control over 10 years (GARP, 2013).