Sarbanes-Oxley%20Act%20of%202002

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Sarbanes-Oxley Act of 2002

• UAA ACCT 316 Fall 2003 Accounting Information
  Systems Dr. Fred Barbee

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Meet the
Culprits
Authors

• Senator Paul S. Sarbanes
• Democrat
• Maryland

• Congressman Michael G. Oxley
• Republican
• Ohio

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SOX 2002

• Title 1 Public Company Accounting Oversight
  Board.
• Title II Auditor Independence
• Title III Corporate Responsibility
• Title IV Enhanced Financial Disclosures.

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SOX 2002

• Title V Analyst Conflicts of Interest
• Title VI Commission Resources and Authority
• Title VII Studies and Reports
• Title VIII Corporate and Criminal Fraud
  Accountability

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SOX 2002

• Title IX White-Collar Crime Penalty
  Enhancements
• Title X Corporate Tax Returns
• Title XI Corporate Fraud and Accountability

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Title IV Enhanced Financial Disclosures
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Enhanced Financial Disclosures

• Sec. 401 Disclosures in Periodic Reports
• Sec. 402 Enhanced Conflict of Interest
  Provisions.
• Sec. 403 Disclosures of Transactions Involving
  Management and Principal Stockholders

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Enhanced Financial Disclosures

• Sec. 404 Management Assessment of Internal
  Controls
• Sec. 405 Exemption
• Sec. 406 Code of Ethics for Senior Financial
  Officers.
• Sec. 407 Disclosure of Audit Committee Financial
  Expert

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Enhanced Financial Disclosures

• Sec. 408 Enhanced Review of Periodic Disclosures
  by Issuers
• Sec. 409 Real Time Issuer Disclosures

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Section 404
Management Assessment of Internal Controls

• Final Rule issued by the SEC May 27, 2003.
  Effective June 15, 2004 or April 15, 2005.

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Sec. 404(a)
Internal Control Reports

• Applies to companies subject to the reporting
  requirements of the Securities Exchange Act of
  1934.
• These companies must include in their annual
  reports a report of management on the companys
  internal control over financial reporting.

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Report Must Include . . .

1. A statement of managements responsibility for
   establishing and maintaining adequate internal
   control over financial reporting for the company.

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Report Must Include . . .

1. Managements assessment of the effectiveness of
   the companys internal control over financial
   reporting as of the end of the companys most
   recent fiscal year.

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Report Must Include . . .

1. A statement identifying the framework used by
   management to evaluate the effectiveness of the
   companys internal control over financial
   reporting.

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Report Must Include . . .

1. A statement that the firms auditor has issued an
   attestation report on managements assessment.

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Defining Internal Control for Sec. 404 of
Sarbanes-Oxley
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• A process designed by, or under the supervision
  of, the registrants principal executive and
  principal financial officers, or persons
  performing similar functions, and effected by the
  registrants board of directors, management and
  other personnel, to provide reasonable assurance
  regarding

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• the reliability of financial reporting and the
  preparation of financial statements for external
  purposes in accordance with generally accepted
  accounting principles and includes those policies
  and procedures that

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1. Pertain to the maintenance of records that in
   reasonable detail accurately and fairly reflect
   the transactions and dispositions of the assets
   of the registrant.

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1. Provide reasonable assurance that transactions
   are recorded as necessary to permit preparation
   of financial statements in accordance with GAAP,
   and that receipts and expenditures of the
   registrant are being made only in accordance with
   authorizations of management and directors of the
   registrant.

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1. Provide reasonable assurance regarding prevention
   or timely detection of unauthorized acquisition,
   use or disposition of the registrants assets
   that could have a material effect on the
   financial statements.

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Title VIII Corporate and Criminal Fraud
Accountability
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Corporate and Criminal Fraud Accountability

• Sec. 802 Criminal Penalties for Altering
  Documents
• Destruction, alteration, or falsification of
  records in federal investigations and bankruptcy.
  
• Fined and/or imprisoned for not more than 20
  years.
• HealthSouth

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Corporate and Criminal Fraud Accountability

• Sec. 802 Criminal Penalties for Altering
  Documents
• Destruction of corporate audit records
• Fined and/or imprisoned not more than 5 years.
• Thomas Trauger former Ernst Young partner.

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Title IX White-Collar Crime Penalty Enhancements
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White-Collar Crime Penalty Enhancements

• Criminal penalties for mail/wire fraud
• 5 years ? 20 years
• Amendment to sentencing guidelines relating to
  Employee Retirement Income Security Act of 1974.
• 5,000 ? 100,000
• 2 Year ? 10 years
• 100,000 ? 500,000

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White-Collar Crime Penalty Enhancements

• Failure of corporate officers to certify
  financial reports.
• Fined 1,000,000 and/or imprisoned not more than
  10 years.
• Fined 5,000,000 and/or imprisoned not more than
  20 years.