The issuers are required to give a disclosure to the public on an urgent basis. This will include information on material changes that have occurred in the financial condition or any other operations. The disclosures made need to be given in a format and terms that are easy to understand hence be supported by qualitative and trend information on the graphic presentations as appropriate as possible.
This section mainly pertains to the criminal penalties to be given in a situation where the documents in the reports being issued have been altered. In this section the penalties to be given and fine are stated and may go as high as 20 years of imprisonment if one is found guilty of alteration destruction, concealment, mutilation, falsification of documents, records or any other tangible object all with the intention of obstructing, influencing of impending a legal investigation. In this section, it also states that any accountant who knowingly took part in violation of the requirements that are needed in audit papers or any reviews may receive sentences of up to 10 years and about 5 years in the case of same actions but on a review basis.
Importance of the Sarbanes-Oxley Act
Kamar et al (2007), states that the purpose of the Act was increasing the measures that have been put up by the action of making corporate governance stronger hence more accountable. This was going to be achieved by the formalization and strengthening of all internal checks and balances in place in corporations. The levels of control and all sign-offs designed in various must be properly instituted. The financial reporting exercise that is done in the corporations needs to be done in a manner that will ensure full disclosure. Finally the mode of corporate governance that is employed must ensure that there is full transparency in all actions.
Benefits and Cost of the SOX
By passing the Act in 2002 the congress was able to strengthen the corporate governance in place and hence manage to restore and build the confidence of the investor. In Section 404, the Act requires that all management auditors need to evaluate all the annual firms internal report on the financial controls. Besides this, the SOX enables the tightening of rules on disclosure that obligates the management to give certification on all periodic reports, strengthen the board and raise the independence of the auditor (Baral, 2006.