The regulations and enforcement strategies followed by the Sarbanes-Oxley Act (SOX) modify or enhance existing rules tackling security concerns. The SOX Act brings improvements in corporate responsibility, accounting directives, new protections, and criminal punishment. Apart from the financial aspects of a company, such as accuracies, controls, and audits, the SOX Act influences demand for information technology sectors concerning electronic records (Abdioglu, Bamiatzi, Cavusgil, Khurshed, & Stathopoulos, 2015).
The standards established in the Act do not indicate how businesses ought to maintain their records. Still, they only affirm that the information and technology departments have the accountability to store them (Gu & Zhang, 2017). The SOX Act has a high impact on corporate governance in the United States. It encourages public companies to reinforce audit boards, carry out internal control checks, hold directors and officers responsible for the precision of fiscal statements, and fortify disclosure. It also calls for stricter criminal punishments for security fraud and transforms the operation of public accounting companies.
Under corporate governance, the members of audit committees have to be independent of the management, acquire new accountabilities that include the approval of several services, choose and oversee external auditors, and address complaints concerning the accounting functions of the executive. The SOX Act modifies management’s accountability for fiscal reporting considerably (Banerjee, Humphery-Jenner, & Nanda, 2015).
The Act demands that top executives personally confirm the accurateness of monetary reports. When the executives deliberately or intentionally make mistaken certifications, they may serve more than ten years’ jail terms. Suppose companies are compelled to make necessary accounting restatement attributable to the wrongdoing of executives. In that case, top directors may be forced to forfeit their bonuses or profits obtained from the stock sale. In cases where officers or managers are convicted of securities law infringements, they can be barred from serving in similar roles at public companies.
References
Abdioglu, N., Bamiatzi, V., Cavusgil, S. T., Khurshed, A., & Stathopoulos, K. (2015). Information asymmetry, disclosure and foreign institutional investment: An empirical investigation of the impact of the Sarbanes-Oxley Act. International Business Review, 24(5), 902-915.
Banerjee, S., Humphery-Jenner, M., & Nanda, V. (2015). Restraining overconfident CEOs through improved governance: Evidence from the Sarbanes-Oxley Act. The Review of Financial Studies, 28(10), 2812-2858.
Gu, Y., & Zhang, L. (2017). The impact of the Sarbanes-Oxley Act on corporate innovation. Journal of Economics and Business, 90, 17-30.