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What is Sarbanes-Oxley Act (SOX)

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Francisco Rico

on 27 October 2014

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Transcript of What is Sarbanes-Oxley Act (SOX)

¿ What is
Sarbanes-Oxley Act (SOX) ?
Sarbanes-Oxley Act (SOX)
[ also known as the 'Public Company Accounting Reform and Investor Protection Act' / 'Corporate and Auditing Accountability and Responsibility Act' ]

An act passed by U.S. Congress in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations.
Is arranged into ELEVEN 'titles'
PCAOB,
Transparency,
Auditor Independence,
Personal Responsibility,
Criminal Penalties,
Conflicts Of Interest,
and more...
Aims
OVERALL:
To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.

SPECIFIC:

To provide reasonable assurance that
1º) Assets are safeguarded and used for business purposes
2º) business information is accurate
3º) employees comply with laws and regulations






• All US publicly traded companies

• Subsidiaries of foreign companies in the US

• Private companies that are preparing an IPO


(Sec 2, a, 7 – “ISSUER” & Section 3 of the Securities Exchange Act of 1934)
Nonprofit corporation established by Congress
(Sec. 101.b)
Oversee the audits of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, accurate and independent audit reports
(Sec 101.a)

Sarbanes-Oxley Act (SOX)
Oktober 2014
History
Which is the Periodicity?
How does it work?
How must comply
with SOX ?
ISSUER
PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD ( PCAOB)
Who is the regulatory agency responsible for the compliance of this act?
MAIN
SECTIONS
TITLE III- CORPORATE RESPONSABILITY
SEC 302. CORPORATE RESPONSABILITY FOR FINANCIAL REPORTS
TITLE IV -
ENHANCED FINANCIAL DESCLOSURES
SEC 401. DISCLOSURE S IN PERIODIC REPORTS (Off-balance sheet items)
TITLE IV -
ENHANCED FINANCIAL DESCLOSURES
SEC 404. MANAGMENT ASSESSMENT OF INTERNAL CONTROLS
TITLE IV -
ENHANCED FINANCIAL DESCLOSURES
SEC 409. REAL TIME ISSUER DISCLOSURES
TITLE VIII -
CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY
SEC 802. CRIMINAL PENALTIES FOR ALTERING DOCUMENTS

Summary:

Periodic statutory financial reports are to include certifications that:

• The signing officers have reviewed the report

• The report does not contain any material untrue statements or material omission or be considered misleading

• The signing officers are responsible for internal controls and have evaluated these internal controls


Summary:

Financial statements [FS] are published by issuers are required to be accurate and presented in a manner that does not contain incorrect statements or admit to state material information.
FS shall also include all material off-balance sheet liabilities, obligations or transactions.
Summary:

(The most contentious aspect of SOX)

Issuers are required to publish the scope and adequacy of the internal control structure and procedures for financial reporting

Shall also assess the effectiveness of such internal controls and procedures
Summary:

Issuers are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations.
These disclosures are to be presented in terms that are easy to understand (supported by trend and qualitative information of graphic presentations as appropriate)
Summary:

20 years imprisonment -> altering, destroying, mutilating, concealing, falsifying records, documents or tangible objects with the intent to obstruct, impede or influence a legal investigation

10 years imprisonment -> for accountant who knowingly and wilfully violates the requirements of maintenance of all audit or review papers for a period of 5 years

SEC 906. Fines between 1.000.000-5.000.000 €
Summary
Preface + brief history

Aims of SOX

Subjects mandated -Issuers

PCAOB

Overview of main sections

Terex Cranes Germany GmbH
¿ Which are the objectives
of SOX ?

DUTIES OF THE BOARD
Register public accounting firms that prepare audit reports
Establish or adopt standards relating to the preparation of audit reports for issuers
Conduct inspections of registered public accounting firms
Conduct investigations and disciplinary proceedings
Impose appropriate sanctions where justified upon
Booking "line costs" as CapEx
(instead of expenses) on the BS.


Inflating revenues (recorded fictitious
revenues) by "shell companies".


Loans without the approval
of the board
Five Elements of Internal Control:

1. The control Environment

2. Risk assessments

3. CONTROL PROCEDURES.

4. Monitoring

5. Information and communication

What are we doing concerning
SOX at the Finance Department and why?
Why is SOX important
for TEREX?
Thank you for your attention. We would be glad to answer any questions you might have...

Vielen Dank für Ihre Aufmerksamkeit. Wir würden uns freuen alle Fragen die Sie haben, zu beantworten...

Gracias por su atención. Con gusto responderemos cualquier duda al respecto que tenga...
Full transcript