2.  In the wake of Enron and Worldcom scandals , there was a
requirement for more stringent act for the corporate
disclosures
 Created by US Senator Paul Sarbanes and US Congressman
Michael Oxley
 Signed into law July 30, 2002

3.  Restore the public confidence in both public
accounting and publicly traded securities
 Assure ethical business practices through
heightened levels of executive awareness and
accountability

4.  All publicly-traded companies in the United States,
including all wholly-owned subsidiaries, and all
publicly-traded non-US companies doing in
business in the US
 In addition, any private companies that are
preparing for their initial public offering (IPO)
 Auditing Firms
 Equity Research Analysts

5.  Number of Titles – 11

6.  Creation of the Public Company Oversight Board
 The Board is comprised of 5 members (appointees), with a
maximum of two CPA’s
 non-profit organization
 oversee audits of public companies
 under the authority of the SEC

7.  Prohibits registered public accounting firms (RPAFs) who
audit an issuer from
 bookkeeping
 financial information systems design
 appraisal services
 actuarial services
 internal audit outsourcing services
 management/human resource functions
 broker/dealer
 legal/expert services outside the scope of the audit

8.  CEOs and CFOs must certify in any periodic report the
truthfulness and accurateness of that report – creates
liability
 Under certain conditions of re-statement of financials
due to material non-compliance, CEOs and CFOs will
be required to forfeit certain bonuses and profits paid to
them as a result of material misinformation

9.  Issuers must disclose “off-balance sheet transactions” in
periodic reports
 No issuer shall make, extend, modify or renew any personal
loan to CEOs, CFOs
 In periodic reports filed, the issuer must disclose its code of
ethics for senior financial officers, and if the issuer has not
adopted such a policy, must disclose why not
 Issuer must disclose whether or not its audit committee is
comprised of at least one financial expert, and if not, why

10.  Restricts the ability of investment bankers to pre-
approve research reports
 Ensures research analysts are not supervised by persons
involved in investment banking activities
 Requires specific conflict of interest disclosures by
research analysts making public appearances and by
brokers or dealers in research reports including:
Whether the analyst holds securities in the public
company that is the subject of the appearance or report
Whether a public company that is the subject of an
appearance or report is, or during the prior one year
period was, a client of the broker or dealer

11.  Authorizes the SEC to censure persons appearing or
practicing before the Commission, if it finds a person to
have engaged in unethical or improper professional conduct
 Authorizes Federal courts to prohibit persons from
participating in penny stock offerings if the persons are
subject proceedings instituted for alleged violations of
securities laws.

12.  The Comptroller General of the US shall conduct a study
regarding the consolidation of public accounting firms ,
analyze the past, present and future impact of the
consolidations, and create solutions to problems discovered
caused by such consolidations
 GAO report on whether investment banks and financial
advisors assisted public companies in earnings manipulation
and obfuscation of financial conditions

13.  Imposes criminal penalties for knowingly destroying,
altering, concealing, or falsifying records
 All audit report or related work papers must be kept by the
auditor for at least 5 years
 Whistleblower protection – employees of either public
companies or public accounting firms are protected from
employers taking actions against them

14.  Establishes criminal liability for failure of corporate officers to
certify financial reports
 maximum imprisonment of ten years for knowing that the
periodic report does not comply with the act
 or for twenty years for willfully certifying a statement
knowing it does not comply with this act.

15.  Federal income tax return of a corporation should be
signed by its CEO

16.  The SEC has the authority to freeze payments to any
individual involved in an investigation of a possible security
violation
 Amends Federal criminal law to establish a maximum 20
year prison term for tampering with a record or otherwise
impeding an official proceeding

17.  Besides lawsuits and negative publicity, a corporate officer
who does not comply or submits an inaccurate
certification is subject to a fine up to $1 million and ten
years in prison, even if done mistakenly.
 If a wrong certification was submitted purposely, the fine
can be up to $5 million and twenty years in prison.

18. Thank You