The act also states that chief financial controllers and auditors need to provide supporting evidence that will be used to whistleblow on the abuse of company funds (Morgan et al, 2008).
This review was seen to be important as it would enable the Securities and Exchange Commission (SEC) to temporarily freeze any transactions or payments that were deemed to be unusual for the company (Kuschnik, 2008).
In general, the act deals with ensuring the financial reports generated by auditors and finance managers within organization to develop internal control reports that can be used to determine the accuracy of the company’s financial data.
Once it was enacted, SOX was meant to introduce major changes to the corporate governance and financial management of capital in many corporations within America.
Under the Sarbanes-Oxley Act of 2002, companies that are publicly traded in the US are required to increase their internal financial and accounting controls after personal clarification with the chief executive and chief financial officers of the company.
It also ensures that the top managers of a corporate organization are held accountable for the accuracy of financial statements released at the end of every company financial year (Litvak, 2007).
According to Bednanrz (2006), the costs of implementing the SOX act will exceed the benefits of the act when it is fully implemented.
All these aspects are included within the eleven sections of the act where they analyse the specific mandates and requirements that managers need to have when conducting financial reporting (Kuschnik, 2008).
Each of these sub sections are important and necessary in the financial management of publicly traded corporation as they ensure that there is accountability during the management of financial funds.
Companies that had strong internal controls were able to experience an increase in their share prices and their financial statements were more reliable (Morgan et al, 2008).
While many legislators have praised the Sarbanes-Oxley act to be effective in dealing with financial fraud within corporations, many business managers have expressed frustration with the act.