sox presentation by dsa
DESCRIPTION
SOX by DSATRANSCRIPT
Sarbanes-Oxley Act “SOX”
'Public Company Accounting Reform and Investor Protection Act'
Presented By:
Daniyal Shahid Arain
111122
WABILITYKnowledge & Experience
Agenda
SOX
I. BackgroundII. ReasonsIII. Major SectionsIV. Implementation CostV. Benefits to InvestorVI. Benefits to CompanyVII. PenaltiesVIII.Criticism
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Background
Background
The Sarbanes-Oxley Act of 2002:
Created by US Senator Paul Sarbanes (D-Maryland) and US Congressman Michael Oxley (R-Ohio) Signed into law July 30, 2002
Has usher d in changes to corporate governance that rank among the most sweeping in history.
Developed in response to recent corporate accounting scandals.
Aimed at improving the transparency and accuracy of financial accounting of publicly traded companies.
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SOX Basics
Accounting Scandals
Public Markets Decline
Congress Respond
Sarbanes Oxley Act
Enron, Worldcom, Tyco
Public Call to Restore Investor ConfidenceAct Passed
Public Markets Decline Significantly
Sox Basics
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SOX Basics
Law
Happens
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The ACT
Section 302 --CEOs and CFOs to sign off on the validity and accuracy of their companies’ financial numbers and to certify the controls and procedures behind their financial reports.
Section 404 --Organizations must ensure that the audit process behind their financial reporting is not only comprehensive and accurate, but that they can also meet strict quarterly timeframes for reporting on an ongoing basis.
Sarbanes-Oxley: The Act
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More SOX
Section 409 -- Issuers are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations.
Section 802 -- Imposes penalties of fines and/or up to 20 years imprisonment for altering, destroying, mutilating, concealing, falsifying records, documents or tangible objects with the intent to obstruct, impede or influence a legal investigation.
Sarbanes-Oxley: The Act
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Questions
SOX- Act Section
Section 302 Section 404 Section 409
Key Questions for Executives Responsible for the Compliance
Who in the organization is responsible for ensuring the integrity and always-on status of finance and accounting systems?
Does the internal controls framework include business continuity planning and disaster recovery considerations?
How will potential “material changes” be monitored when the systems conducting the monitoring go offline?
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SOX Costs
The Government estimates:$125,000 per Company (Small)$391,000 per Company (Large)
CFOs estimates: $225,000 (Small Company)$3.14 million (Large Company)
The Trade Group Financial ExecutivesSurvey’s final results:
$291,000 per Small Company $4.36 million per Large Company
Sarbanes-Oxley: Average Cost Of Implementation
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SOX Benefits to Investors
Companies have to reveal poor financial reporting practices that should be stopped.
More trust in the financial statements of any company before deciding on any investments.
Benefits to Investors
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SOX Benefits to Companies
Benefits from consolidated data store
Benefits from ability to find data and create reports – business intelligence
Side benefit: discovery of internal fraud and theft through tighter controls
Result: positive shareholder value
Benefits to Companies
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Penalties
Action Punishment Reference
“Knowingly” altering, destroying, or falsifying documents in an effort to impede, obstruct, or influence an investigation
Fines up to $15 million and/or Imprisonment up to 20 years
Title VIII, Sec. 802
Securities Fraud Fines and/or imprisonment up to 25 years
Title VIII, Sec. 807
Mail and Wire Fraud Imprisonment up to 20 years Title IX, Sec. 903
“Willfully” certifying financial reports that do not meet regulatory requirements
Fines up to $5 million and/or Imprisonment up to 20 years
Title IX, Sec. 906
Violating SEC regulations May be ineligible to hold a director or officer level position at any publicly traded company
Title XI, Sec. 1105
Penalties
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SOX-Criticism
• Many Credible Personalities have contended that SOX was an unnecessary and costly government intrusion into corporate management that places U.S. corporations at a competitive disadvantage with foreign firms, driving businesses out of the United States.
• These regulations are damaging American capital markets by providing an incentive for small US firms and foreign firms to deregister from US stock exchanges