Key Provisions Of The Sarbanes Oxley Act

This article advises small and emerging public companies with the key provisions of the Sarbanes Oxley Act and what they need to do to ensure they are in compliance with the required provisions. In this article, we also present how Prolianze can assist the small and emerging companies with their responsibilities under the Sarbanes Oxley Act of 2002.
Key provisions of the Sarbanes Oxley Act

Section 301 – Audit Committee: This section places the responsibility of hiring and compensating the company auditors with the Audit Committee. The committee is also required to establish mechanism to receive, retain, and treatment of complaints regarding accounting, internal accounting controls, or auditing matters.
Section 302 – Responsibility for Financial Reports: CEO and CFO are required to issue a certification with their quarterly and annual report stating that the financial statements are accurate and they are not aware of any material misstatement in financial statements. The certification also requires that the CEO and CFO understand that they are responsible for establishing, maintaining and evaluating internal controls.
Section 402 – Conflicts of Interest: Prohibits, directly or indirectly, including through any subsidiary, to extend or maintain credit, to arrange for the extension of credit, or to renew an extension of credit, in the form of a personal loan to or for any director or executive officer.
Section 404 – Management’s Assessment of Internal Controls: Each public company annual report should contain an assessment, as of the end of the most recent fiscal year of the issuer, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.
Section 406 – Code of Ethics: A code of ethics is required for senior financial officers, applicable to the principal financial officer, comptroller or principal accounting officer, or persons performing similar functions.
Section 407 – Audit Committee Financial Expert: Each public company audit committee is required to have one designated financial expert. The financial expert is defined as someone who has the knowledge of US GAAP, experience with preparation and auditing of financial statements and internal accounting controls, and understands the audit committee functions.
Section 802 – Criminal Penalties for Altering Documents: This section established criminal penalties including a fine and imprisonment of up to 20 years of both. Criminal penalties may be applied to whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to destruct, alter, or falsify records in Federal investigations and bankruptcy.
Section 806 – Whistleblower Protection: This section establishes the whistleblower protection provisions to protect the employees of the publically traded companies who may report any wrongdoing to federal authorities as well as his supervisor. The section provides for civil liabilities to prevent discrimination against the whistleblower.
Section 906 – Corporate Responsibility for Financial Reports: A statement of required with the periodic reports by the CEO and CFO that information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of the issuer.
Section 1107 – Retaliation Against Informants: This section provides for the criminal liabilities against the individuals who retaliate against the informants who provides truthful information relating to the commission or possible commission of any Federal offense to any law enforcement officer. The criminal liabilities include a fine and imprisonment of up to 10 years, or both.

By: S Prahalad

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About Author: The Author is the co-founder the Prolianze Group, LLC and heads up the Risk and Compliance Services at Prolianze. Based in Fort Lauderdale, he is responsible for Sarbanes Oxley compliance and Internal Audit engagements. The Key Provisions of Sarbanes Oxley is also available in our website.