Question

What was the need of Surbance oxleys act? breifly explain 500 words

Answer 1

Need for Sarbanes Oxley (SOX) Act - This Act was initiated on July, 2002 to make the financial market stable and protect investors from fraud. It increases the base of audit associations, increases the need for disclosure of financial statements making directors and executives liable personally for its accuracy. It also ensures strict measurements by imbibing criminal measures for fraud matters.

A company is required to disclosure its financial statements including proforma statements so that it confirms with the GAAP principles. Also stock transactions must be disclosed to SEBI within two days. Some of the benefits of SOX compliance is measurement of risk analysis. Another benefit is increase in awareness of internal controls. This increases the audit performance. This would lead to better financial reporting which as well increases operational efficiency and enhance better team management.

Thus Sarbanes Oxley Act is a blessing in disguise as it suits the needs and protection of the investors from fraud. It also restricts conflict of interest of investors. It protects shareholders, employees and public from basic accounting fault and fraud. It also increases the accountability and responsibility of company executives in preparation of reports. It is on one hand protecting the company affairs and also increasing the righteousness of public and investors. This is changed the behaviour of corporate world and also increased the confidence of the investors in having faith in investing in the company. It is a very important tool for the company to reinstate the policies of the company.