Sarbanes Oxley act.Otherwise known as Public companies accounting reforms and investor protection act. It was enacted in 2002 in USA after lot of scams arosen on accounting framework whereby investors lose faith and confidence on accounting disclosures.
The Sarbanes-Oxley Act of 2002 (often shortened to SOX and named for its sponsors Senator Paul Sarbanes and Representative Michael G. Oxley) is a law that was passed in response to the financial scandals such as Enron and WorldCom. The law establishes new, stricter standards for all US publicly traded companies. It does not apply to privately companies. The Act is administered by the Securities and Exchange Commission (SEC), which deals with compliance, rules and requirements. The Act also created a new agency, the Public Company Accounting Oversight Board, or PCAOB, which is in charge of overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies.
Key Facts of the Act:
Date Enacted: January 23, 2002. Sponsors: Banking Committee Chairman Paul Sarbanes (D-Md.) and Congressman Michael G. Oxley The vote in the Senate: 97-to-0. Stated purpose: "To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes."
Key Sections Section 201 outlines Prohibited Auditor Activities. Section 302 describes the CEO's and CFO's new responsibilities regarding corporate reports. Section 404 addresses the Management Assessment of Internal Controls. Section 409 outlines Real Time Disclosure. Section 802 describes criminal penalties for altering documents. Section 806 describes whistleblower protection. Section 807 describes criminal penalities for fraud.