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
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