Legal Issues

The Sarbanes–Oxley Act is also referred to as SOX and came into force on 30th July 2002. This was necessitated by many accounting and corporate scandals in United States back then. The main aim of this law was to bring back the trust the Americans had in the corporate sector. This law emphasis that public traded corporation should have large number of board members that oversee the entire transactions and the auditing process in the organization. Although the bill deals specifically with the publicly traded institutions many legislatures feels the need of it to be applied to the non profit organizations (Vancea, 2003_.

The SOX brought in many noticeable changes within these companies, is forced several institutions to make major adjustments within them for compliance. The top executives in organizations are expected to be accountable for the institutions financial data and are subject to prosecution incase of malpractice. Due to this therefore, SOX has become a priority to all publicly traded companies.

Section 302of the act, requires all the CFOs and CEOs of corporations to produce financial statements quarterly and also annually, failure to which they can be prosecuted. Ignoring this exposes them to be fined up to $5 million US dollars or jailed for 20 years. Many companies see this act as an opportunity to use to improve their skills in management and productivity. The problem arises how to use it in order to put the company in a better position in effectiveness and long term success (Recine, 2002). Interestingly, many private companies are adopting this act regardless whether they are bound to comply or not and it has helped to create an atmosphere that is flexible to changes if need arises.

The other critical implication is the requirement for the external auditors and the managements to inform on the accuracy of the company’s internal control. The process is costly for any company to implement. This has forced many companies to computerize their systems and by so doing they have indeed reduced the cost required. Complying with the regulation the smaller companies have been negatively affected because the cost involved is standard to all. This put these smaller companies at risk over the most established one.

In section 1107 of the act it provides the protection of the whistleblowers.  It says that anyone who interferes with the whistleblower’s work or their life and proved above reasonable doubt that he is guilty then he will be imprisoned for ten year    Whistleblower refers to person, a group, or organization that sees the need to alert or bring to the attention to the people or authorities concerned on issues of malpractice within an institution either internally or externally.

There are procedures to be followed in order to have an effective in whistle blowing in any organization. The entire employee in the organization has to be trained on same of these important aspects of in whistle blowing. The blowers have to be aware of degree of the consequences and the benefits the company will gain as a result. It is also very critical for the whistlers to have absolute proof of their claims above a reasonable doubt. They must also consider the time that will be involved in the process, the less time the better to consider exposing (Kohn, Calapinto, 2004). The whistle blowers have to consider the closeness they have with the victim, a person living some miles away from the victim is better in doing the exposing the victim. It is very important to them weigh the density of the malpractice, analyze it be they consider bring to the attention of the public.  . It is advisable for people to whistle blow when an offense is been committed and nothing is do despite reporting to the respective offices.  Their loyalty to the organization should be important to them and on top of all that they should be ready to bear the responsibilities of their actions (Lander, 2004). Whistle blowing is an act we should encourage in any organization if done in the right procedure and without heal motives against an individual or an institution.