Explain the provisions of section 302 of the Sarbanes-Oxley Act including obligations of officers; nature and scope of assertions; accounting requirements; and legal liability of officers.

"Section 302 of the Sarbanes-Oxley Act states that the CEO and CFO are directly responsible for the accuracy, documentation and submission of all financial reports as well as the internal control structure to the SEC," according to sarbanes-oxley-101.com.  So, Section 302 is essentially about the responsibilities of principal officers of the company, especially the principal executive and financial officers.

1. Obligations of officers: To certify each annual and quarterly report.  To ensure that the issued financial statements and other financial information are not misleading.  To ensure that the information is fairly presented.

2. Nature and Scope of Assertions:

a) That the information presented are fairly presented with no misleading statements

b) That the internal controls are in place and operating effectively

c) To asset that they are aware of all material information relating to the issuing company

d) That they have evaluated internal controls, their effectiveness, and changes in controls.

3. Accounting requirements:

a) Ensure effective internal accounting controls

b) Disclose all material financial information to auditors and audit committee

c) File periodic reports to SEC in compliance with section 13(a) and 15(d) of the SEC Act of 1934.

4. Legal liability of officers:  This is covered in Section 906 of the Sarbanes-Oxley Act.  The section prescribes that officers are liable for "penalties upward of $5 million in fines and 20 years in prison" for any violation of the Act.

Explanation:

The Sarbanes-Oxley Act of 2002 is a federal law which was made in response to the accounting scandals following the collapse of Worldcom and Enron. The purpose of the Act was to safeguard shareholders, employees, and the public from accounting errors and fraudulent financial practices by listed companies.  According to sarbanes-oxley-101.com, the Act requires "all financial reports to include an Internal Controls Report," to prove the accuracy and adequacy of controls for ensuring that financial information is not misleading.