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The Sarbanes-Oxley act was enacted to enhance the proper function of the securities markets. Required: Briefly...

The Sarbanes-Oxley act was enacted to enhance the proper function of the securities markets.
Required:
Briefly describe three aspects of the Sarbanes-Oxley Act that are designed to improve the financial reporting process.
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Answer #1

Changes in financial reporting in the Sarbanes Oxley act are:

Financial reports need to be certified by the top management. In case of a false certification, the top managers are liable for upto 10 to 20 years in jail. If the restatement has to be made due to management's miscount, they may be required to give up their bonuses or profits made from the sale of shares.

The act increases the disclosure requirements for the firms.Off balance sheet items need to be disclosed. Insiders stock transactions also need to be disclosed to the SEC.

The establishment of Public Company Accounting Oversight Board which sets standards for accountants limiting their conflicts of interest. It also requires for the lead auditor to be rotated every five years.

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