Sarbanes Oxley Compliance
Sarbanes Oxley Section 301
The Untold Story Of Sarbanes Oxley Section 301
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One of the largest and most publicized audit failures came in 2001 with the downfall of ENRON. This energy corporation based in Texas caused the risk and eventually the loss of an estimated $11 billion to its stockholders when it declared bankruptcy in 2001. This company watched its stock fall from $90 per share on the New York Stock Exchange to a measly $0.10 in 2001. The Sarbanes Oxley Section 301 has been implemented as an addition to the Sarbanes Oxley Act of 2002 in an attempt to eliminate the fraudulent auditing practices and opaque financial disclosures that eventually caused this painful loss to so many. The implementation of such an act was necessary to protect investors and at the same time instill a sense of confidence that has been lost by assuring the transparent financial disclosure of all corporations that wish to offer shares of their company to employees and other investors. Sarbanes Oxley Section 301 is a rule that attempts to reduce the risk to stockholders and increase the accuracy and clarity of financial information released by corporations to the public. This law was passed following the acknowledgement of wrongdoing on the behalf of ENRON and later by World-Com. The Sarbanes Oxley Act of 2002 has a number of various arms that must be taken into account. The Sarbanes Oxley Section 301 arm states that all corporations must employ an independent audit committee. These committee members can receive nothing other than compensation for sitting on the committee from the corporation that they will be auditing. No other benefits of any kind can be accepted by the committee members. Preventing a conflict of interest on anyone's behalf. This independent audit committee will also select and then manage or overlook an independent accountant for the corporation. Other duties of this committee will include listening to and managing all corporation complaints in regards to its accounting and various procedures. If the committee feels the need for further assistance in any instance, they have the authority and are bound to pursue acquiring independent advisers to assist them. The advisers can then review the conflicts and compliance of said corporation. Sarbanes Oxley Section 301 expects that the committee will also analyze, evaluate and oversee reports pertaining to the financial situation of the corporation. All of this has been put in place to prevent the negative courses that history took. The financial costs that the downfall of ENRON caused so many people, needs to be defined and prevented from happening again.
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