Sarbanes-Oxley Act of 2002 ("SOX") was named after the sponsors of the bill, Paul S. Sarbanes (Democrat-Maryland) and Michael Oxley Republican-Ohio) as the first effort to reform financial reporting and hold accountability after the collapse of Enron and their auditors Arthur Andersen. Enron was at one time one of the 10 largest U.S. Companies. Arthur Andersen was one of the largest global network of public accounting firms. SOX is also referred to as the Public Company Accounting Reform and Investor Protection Act of 2002.

When SOX was signed into law, it set new standards for financial reporting and accountability for the vailidity of those financial statements being reported. Corporate governance became mandatory.

The bill significantly affects the regulation of accountants; imposes new responsibilities and liabilities on CEOs, CFOs and Boards of Directors; and extends criminal penalties, in terms of both fines and prison sentences, for corporate fraud, destruction of documents and impeding investigations.

A summary of the changes include:
• Timely disclosure of information
• Senior Officer certification
• Increased transparency
• Independence - mandatory
• Mandatory SEC review
• New audit committee requirements
• Prohibition of loans or exchanges with senior management
• SOX allows SEC to impose greater criminal penalties for corporate crimes
• Creation of Public Company Accounting Oversight Board
• Newly defined analyst conflicts of interest rules
• Professional responsibility guidelines for attorneys
• Protection for whistleblowers

For more detail, select SOX Analysis ....