Sarbanes Oxley Act– Stringent Measures Of Section 302
Following the disclosure of financial irregularities in a number of top publicly traded U.S. companies, investor confidence hit rock bottom and serious issues cropped up about the transparency and accountability of the working procedure of financial controls in these companies. It was under these circumstances that the U.S. Congress passed the Sarbanes Oxley Act which was signed to become a law on the July 30, 2002 by President George W. Bush. Sarbanes Oxley Section 302 is one of the most significant sections of the Sarbanes Oxley Section Act of 2002. It is the second section of the third title of the Act and it calls for Internal Control certification. The certifications bring civil as well as criminal certification provisions in effect. The Sarbanes Oxley Section 302 invokes title 15 of the U.S. Code which calls for civil provision and Section 906 invokes title 18 of the U.S. Code which calls for criminal provisions.
Sarbanes Oxley Section 302 makes it necessary for every concerned company to make full and accurate disclosure related to financial matters. Sarbanes Oxley 302 requires that the officers who sign these reports disclosing financial details must certify their responsibility for the establishment and maintenance of the internal controls of the company. The section also requires that they must certify about having designed those internal controls which will ensure that important information related to the company and all its subsidiaries has been conveyed to the officers especially during the period of the preparation of periodic reports.
The personnel concerned are required to to have done an evaluation of the internal controls which have been put in place not before a period of 90 days and presented a report about the effectiveness of the said control measures.
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Sarbanes Oxley Section 302 when read with Section 404 and Sarbanes Oxley Section 409 of the same Act, makes it necessary that the company management deliver regular reports about internal control measures. Sarbanes Oxley Section 302 states that this report should be affirming management responsibility for maintenance and establishment of an internal control structure and procedure which oversees financial reporting. Sarbanes Oxley Section 302 when read with other relevant sections now makes it necessary that external auditors issue reports about their own analysis and opinion about the internal control effectiveness and reporting methods of financial data. With stringent measures, Sarbanes Oxley Section 302 continues to be a hot topic of debate in the corporate circles. |
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