The Sarbanes-Oxley securities legislation contains several highlights related to corporate governance and compliance, such as corporate responsibility for financial reports, management assessment of internal controls and real-time issuer disclosures, according to Sarbanes-Oxley-101. The act was signed into law by President Bush on July 30, 2002.
Among the most important sections of the act is Section 302, corporate responsibility for financial reports, which establishes an internal accounting controls mandate on corporate CEOs and CFOs to review all financial reports and ensure that the reports are free of misrepresentations, presented in a fair manner and clear of auditing fraud, explains Sarbanes-Oxley-101.
Section 404, management assessment of internal controls, requires annual financial reports that contain an internal control holding management responsible for establishing and maintaining adequate financial reporting controls and procedures, while articulating an assessment of the effectiveness of those internal controls, notes the U.S. Securities and Exchange Commission.
Section 409, real-time issuer disclosures, requires corporations to disclose as quickly and urgently as possible information related to material changes to their financial or operational condition, according to Family Business Experts.
The Sarbanes-Oxley Act was passed in response to a number of corporate and public accounting scandals, which included Enron, Arthur Anderson, Global Crossing and World.com, notes Forbes. It is among the most sweeping legislation ever passed to directly impact corporations and public accounting firms by addressing systemic weaknesses in the way that financial data is reported.