Transcript

Slide 1: Congress often reacts to catastrophes by enacting laws. Often these laws are enacted in such haste that the true implications of the law are not completely known until the law is applied to real situations in the real world. The Sarbanes-Oxley act of 2002 was enacted on January 23rd, 2002 by congress as “an act to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes”. This was congress’ attempt at legislating “evil out of our corporations”.

One of the important sections of this act is in regards to internal controls. This law now requires that the CEO and CFO of publicly traded companies “certify” that they have and operational system of internal controls. To do this the internal controls first need to be documented, analyzed and modified for necessary changes and then reviewed to determine if they were functioning as designed. Although in truth most companies should have had their internal controls documented, most did not and are now scrambling to be in compliance with the law.

Slide 2: Another significant section is the section on whistleblowers. Sarbanes-Oxley is purported to have finally given teeth to whistleblower protection. Not only does it provide remedy against wrongful discharge but it also mandates that companies establish procedures to accept internal whistleblower complaints.