Pros of Sarbanes Oxley Act

In: Business and Management

Submitted By edmcfarland714
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Pages 5
Pros of Sarbanes Oxley Act of 2002 1) Protection of whistleblowers * Section 806 attempts to encourage and protect whistleblowers by providing for anonymous whistleblowing, establishing criminal penalties for retaliation against whistle blowing, and clearly defining whistleblowing channels. * The rule states that a company cannot “discharge, demote, suspend, threaten, harass, or in any manner discriminate” against a whistleblower. * Any retaliation against a whistleblower can result in significant fines and/or a prison sentence of up to ten years and the whistleblower can bring a civil suit against the company. * This section of the act not only covers current employees but also covers applicants and former employees of that company. * This rule applies not only to publicly traded companies but also private companies, contractors, subcontractors, and agents of those companies. 2) Auditor Independence * The SEC issued final rules that amen its auditor independence rules as required by Section 208 of SOX. These rules include the following: * Non-audit services- this rule says that the accounting firm doing the auditing of a company cannot also do other types of accounting services including bookkeeping, internal audit outsourcing services, legal services, and many more non auditing services. * Audit committee pre-approvals- requires that an issuer’s audit committee pre-approve all audit and no audit services provided by its auditor. Before the firm is engaged to render a service, the engagement must be approved by the issuer’s audit committee or have pre-approved to policies and procedures established by the audit committee that are detailed as to the particular service. * Partner rotation- this rule prohibits certain audit partners on the audit engagement team from providing audit services for more than five or seven…...

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