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How do the goals of the Sarbanes-Oxley Act of 2002 (SOX) affect the way an organization...

How do the goals of the Sarbanes-Oxley Act of 2002 (SOX) affect the way an organization presents its financial information (focus on a publicly-held company)? Explain. Include why it is important for a financial analyst (you, the MBA) to be knowledgeable about SOX and its implications.

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Answer #1

The provisions of SOX Act are frames in a way such as to boost the investor's confidence in Financial markets and regain their trust which was lost due to the scandals which took place.

SOX requires Public companies to strengthen their Audit committee, perform Internal Control tests, held directors Liable etc

Public Cos. Are reqd to disclose any material off balance sheet arrangements, such as operating lease & special purpose entity.

SOX has also banned loans being given to the executives. It instead provided job protection to whistleblowers.

As a financial analyst, one should be knowledgeable about SOX & it's implementation to ensure that the necessary controls are in place and that no amalomolies are present in the structure of the organisation

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