The section requires that executive officers sign and take responsibility for each 10-k annual report and 10-q quarterly report filed by the company.

These reports are filed at the end of each company's fiscal year and at the end of each quarter and contain data regarding the financial performance of the firm. Financial statements such as balance sheets, cash flow statements, and income statements can all be found inside a 10-k and 10-q report.

The 10-k and 10-q reports hold a very similar format and are different only in the respect that the 10-k report is annual and reflects performance over the past fiscal year while the 10-q only reviews the performance of the past quarter. These reports are submitted to the SEC and are the basis for the change in the price many stocks—it is essentially a report card reporting how well the company has performed.

In the accounting scandals of the early 2000s, these reports were the subject of massive investigations as they contained faulty accounting methods and dishonest record-keeping while often artificially inflated the value of the company and exaggerated its profits.

Under this title of the Sarbanes-Oxley Act, the executive officers must take personal responsibility for the contents of these reports and are also required to have designed internal control methods to prevent the occurrence of fraud.

This section also states that in the event of a foreign reincorporation—a transfer of the company's corporate domicile or move to another country— the same rules apply. This is a common theme throughout the Sarbanes-Oxley Act; foreign based companies are still accountable to the standards set forth in this legislation.

If a company executive is found to have had an improper influence on the audit report, he stands to lose his entire bonus and compensation for that fiscal year.

This title also prescribes specific rules regarding executive transactions during a "black-out" period in which employees are not allowed to sell their shares purchased through the company's 401k retirement plan. The Sarbanes-Oxley Act explicitly prohibits executives form selling stock during a company's black out period.

Often times, when a company undergoes administrative changes in its 401k plan, employees are blocked from selling or purchasing stock in what is known as a blackout period. During the Enron scandal, employees found themselves in a blackout period as the stock's price tumbled; at the same time senior executives were dumping their shares on the market, leaving many employees without any retirement as they saw the value of their 401k plans virtually disappear.

This title of the Sarbanes-Oxley Act requires that a company notifies its employees well in advance of a black out period and safeguards them from facing the fate of many Enron employees who essentially robbed of their retirement.

More responsibility and pressure is put on the executive level employees to discourage fraud and to protect the employees of public companies.

The Sarbanes-Oxley Series -- Learn More About Sarbox

The Sarbanes-Oxley Act: An Introduction
The Sarbanes-Oxley Act: Title I
The Sarbanes-Oxley Act: Title II
The Sarbanes-Oxley Act: Title III—Audit Committees
The Sarbanes-Oxley Act: Title III—Blackout Periods
The Sarbanes-Oxley Act: Title IV
The Sarbanes-Oxley Act: Title V
The Sarbanes-Oxley Act: Title VI
The Sarbanes-Oxley Act: Title VII—Accounting Firms
The Sarbanes-Oxley Act: Title VII— Past Violators
The Sarbanes-Oxley Act: Title VIII
The Sarbanes-Oxley Act: Title IX-XI