Preparation of Financial Statements

• Sarbanes-Oxley requires financial statements to be free not only of falsehoods, but also of misleading omissions. Financial statements must also report off-balance sheet information if it is relevant to the company's financial status. In this way, Sarbanes-Oxley closes two legal and ethical loopholes that have been used in the past to defraud investors.
  
  

Certification of Financial Statements

• Sarbanes-Oxley requires company officers to sign company-issued financial reports and certify that they are accurate, that they fairly present the company's financial status, that the officers are responsible for internal controls, and that they have examined these controls and issued a report within the previous 90 days. They must also provide certain details about their internal controls. In this way, individual company officers may not relieve themselves of responsibility for inaccuracies and fraud by pointing to the accounting department or pleading ignorance.
  
  

Internal Controls

• Issuers of financial statements (usually accounting firms) must report on the internal controls designed to encourage accurate financial reporting. They must not only describe these controls, but must also assess their effectiveness. This makes it more difficult for the company to escape or reduce sanctions by characterizing criminal fraud as simply careless management of internal controls.
  
  

Urgent Reporting

• Many companies have delayed reporting adverse financial changes until the next financial report comes due. Sarbanes-Oxley requires companies to disclose critical information about these changes soon after they occur. These reports must be clear and easy to understand, so that their significance will not be overlooked by investors.
  
  

Documentation Requirements

• Sarbanes-Oxley mandates prison sentences of up to 20 years for anyone who destroys, hides or alters documents or objects for the purpose of obstructing justice, including intentionally misfiling documents so that they are difficult to find. It also mandates imprisonment of up to 10 years for accountants who intentionally fail to retain required auditing and review documents for at least five years. Both company staff and outside contractors (such as outside accountants and lawyers) can be imprisoned or fined for violating this section.