You have been asked to join the board of a large corporation. From what you lear

Question

You have been asked to join the board of a large corporation. From what you learned in this week’s module, what would be some of the questions that you should ask and what are the answers that you are expecting? Explain the Sarbanes and Oxley Act of 2002 and impact on corporate governance. You have been asked to join the board of a large corporation. From what you learned in this week’s module, what would be some of the questions that you should ask and what are the answers that you are expecting? Explain the Sarbanes and Oxley Act of 2002 and impact on corporate governance.

Explanation / Answer

Answer :

While joining the board of a large corporation following questions need to be addressed:-

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 cracks down on corporate fraud. It created the Public Company Accounting Oversight Board to oversee the accounting industry. It banned company loans to executives and gave job protection to whistleblowers. The Act strengthens the independence and financial literacy of corporate boards. It holds CEOs personally responsible for errors in accounting audits. It became law on July 30, 2002. The Securities and Exchange Commission enforces it.

Impact on Corporate Governance:

The act had a profound effect on corporate governance in the U.S. The Sarbanes-Oxley Act requires public companies to strengthen audit committees, perform internal controls tests, make directors and officers personally liable for accuracy of financial statements, and strengthen disclosure. The Sarbanes-Oxley Act also establishes stricter criminal penalties for securities fraud and changes how public accounting firms operate. One direct effect of the Sarbanes-Oxley Act on corporate governance is the strengthening of public companies' audit committees. The audit committee receives wide leverage in overseeing the top management's accounting decisions.

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