The second rule defines specific retention periods for record storage.The first rule prevents the destruction and falsification of financial records.
Section 802 has three specific rules that impact corporate bookkeeping practices: This may require reliance on forensic accounting practices to ensure that financial data is reported consistently and adequately, with audit systems and other safeguards in place to maintain compliance.Īdmittedly, this does have a negative impact on companies who struggle to afford the costs associated with this additional layer of protection. Section 404 establishes stringent internal controls and reporting methods. Violators could even face jail time for failing to comply. This also means that these individuals can be penalized for omitting critical information or distorting their company’s financial performance. This means that financial officers and controllers will be held personally responsible for the accuracy and the transparency of the information contained within the company’s financial statements. This section requires financial officers to personally certify that the financial statements of the business meet the SEC’s disclosure requirements. Implications of the Sarbanes-Oxley ActĬontrollers should be familiar with three specific sections of the Sarbanes-Oxley Act: Section 302, Section 404, and Section 802.
Few could argue with the wisdom of this paradigm shift, though understanding the broader implications of this act will require greater familiarity with the act itself. These shifts reflect a culture of greater transparency in which corporate conscience plays a larger role than simply enhancing the bottom line.