Finance for Managers - Essay Example

Sarbanes Oxley Act Of 2002- Section 303 Definition The Sarbanes Oxley Act that was enacted during the period of 2002 contains various provisions that can help in ensuring that the financial statements being published by publically trading companies are reliable and trustworthy. One such provision is Section 303 which states that it is considered unlawful for any executive or higher level manager of an organization to use coercive actions in order to threaten the auditor and influence their audit reports (Sec.gov, 2003).

The higher level managers may indulge in influencing the auditor in order to provide misleading reports and financial statement to the stakeholders.Enhancing Reliability Of Financial Statements This section of the act is one of the most significant in ensuring that the financial statements being published by the publically trading organizations are reliable and trustworthy. This is because this section empowers the auditors to work in an independent manner and they do not need to fear the higher level managers of the organization such as the director who used to psychologically coerce auditors into providing misleading and fraudulent financial statements and audit reports.

Now auditors may no longer feel threatened to report any wrongdoings or misleading information that organizations provide in financial statements. Due to the failure of the directors to influence the auditors, the organization itself would be afraid that they might be held accountable for providing wrongful information. They may fear that their organization’s reputation may be at stake or they may be heavily fined for indulging in misconduct. Due to this, they themselves may be deterred from providing misleading information and influencing and coercing the auditors.

ReferencesSec.gov,. (2003). Final Rule: Improper Influence on Conduct of Audits; Rel. No. 34-47890, IC-26050; S7-39-02. Retrieved 11 March 2015, from http://www.sec.gov/rules/final/34-47890.htm