Posted on 05/13/2022 9:17:58 AM PDT by DoodleBob
The Sarbanes-Oxley Act (SOX) is a federal act passed in 2002 with bipartisan congressional support to improve auditing and public disclosure in response to several accounting scandals in the early-2000s. The act was named after the bill sponsors, Senator Paul Sarbanes and Representative Michael Oxley, and is also commonly referred to as SOX. Find the statutory text here: Pub.L. 107–204.
Background
In the early-2000s, accounting scandals at major firms shook financial markets, calling on Congress to increase investor protection....
Provisions:
In enacting SOX, one of Congress’s primary aims was to prevent a firm’s management from interfering with an independent financial audit. Section 302 and 303 seek to enhance the independence of audits through regulating internal procedures and management actions. Section 302, codified 15 U.S.C. § 7241, requires public companies to adopt internal procedures for ensuring accuracy of financial statements and makes the CEO and CFO directly responsible for the accuracy, documentation, and submission of the financial reports and internal control structure.
...
Congress also sought to ensure the Act’s effectiveness by providing for robust enforcement and oversight provisions. Section 301, codified 18 U.S.C. § 1350 which imposes criminal liability on any officer, i.e. a CEO and CFO, who knowingly or willfully submits non-complying financial statements. Section 303, codified 15 U.S.C. § 7242, which makes it unlawful for any officer or director to exercise improper influence on audits, such as through coercion, manipulation, or fraud. Section 404, codified 15 U.S.C. § 7262, which requires management to establish adequate internal control structure and procedures for financial reporting. It also requires management to submit an end-of-the-year assessment on the effectiveness of the internal control structure.
(Excerpt) Read more at law.cornell.edu ...
Post of the Thread. EXACTLY.
The “financials” is the common term for how well the company is doing.
The “financial statement” is the cold hard fact of the bank account and the internal and external accounts.
If management says they have 50 trillion customers, that doesn't show in their SOX stuff. It might show in their annual statement, and investors could sue over that. But it is not SOX.
SOX financial statement is around IT and financial controls to assure the numbers on the quarterly and annual statements are accurate. Those numbers are financial realities that are often verifiable from bank account information and such. 50 trillion customers, as a lie, does not affect the $10,000,000 in the bank account. It is the $10,000,000 that gets listed, along with other payables and receivables and such.
Accounting departments and their software do a great job of recording and preparing these numbers. Auditors spot check these amounts and the things that feed into them. IT controls prove no one inappropriate could fudge them.
I intimately know SOX work.
Fraud vitiates everything.
That would include a count of users versus bots and fakes
I was going to reply to this thread, but what you said in Post 36 states and expands on my thoughts way more elegantly and thoroughly than what I was going to say.
Thanks. I think that we all will learn more in the days ahead.
Can bots be created by Twitter itself? Is that what all this is about? That would be a real racket!
Bot groups are created everywhere especially by CCP affiliated groups. I posted a link two years ago on FR about them.
There is a full scale propaganda war throughout America and around the world. The Bot Groups are created to scam viewers into thinking there’s a consensus of opinion, when it’s BS at its root.
Twitter’s CEO and CFO are in serious trouble.
So is Twitter stock. This may mean doom for Twitter.
Sure I’m starting my garden I could use some tasty corn kernels.
Yes, its about the accuracy. My point is that its not accurate if their revenues are overstated....which they are if they’ve overstated their users. In that case they have a significant liability they are not accounting for.
The advertising companies who paid them based on an inflated customer count will be owed refunds. They will sue for those if the company doesn’t cough up - and they will win.
Its not just verifying the amount the company says is in its bank account. There is more to it than that.
You say the IT controls prove no one could fudge them. Correct. If they have a lot more bots than they are reporting, that is a failure of their IT controls - and obviously indicates a major control weakness.
I did audit work for Wells Fargo which had employees inappropriately charging customers fees and opening accounts for them in order to meet their own performance numbers. This overstated Wells’ revenue.....yes even though the accounts were opened and the fees charged and collected. Its not that Wells did not have the money. They did. Its that they engaged in fraudulent activity which flattered their financials. They had to disgorge that money and got hit with some severe added sanctions.
Lemme put it this way, if I were auditing Twitter and found they had overstated their customer count and thus had overcharged their customers, I would not sign my name to any SOX or Audit report that did not list that as a finding.
Thank you both for your replies.
Thank you, FReepers, for explaining the issues in this complex case. Wonderful commentary.
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