Introduction to Sarbanes-Oxley Act
Commonly known as the “Public Company Accounting Reform and Investor Protection Act” and “Corporate and Auditing Accountability and Responsibility Act”, the Sarbanes-Oxley Act was implemented on July 30, 2002. This act is generally addressed as Sarbox or SOX. It is a US Federal law which set new or improved standards for all US public company boards, management and public accounting firms. The act is named after sponsors US Senator Paul Sarbanes (D-MD) and US Representative Michael G. Oxley (R-OH).
Outlines of the Sarbanes-Oxley Act
There are 11 titles contained in the Sarbanes-Oxley Act. These titles delineate specific mandates and requirements for financial reporting. These are summarized below:
1. Public Company Accounting Oversight Board
This title includes nine sections and establishes the Public Company Accounting Oversight thus providing independent oversight of public accounting firms offering audit services.
2. Auditor Independence
This title includes nine sections and establishes standards for external auditor independence, limiting conflicts of interest.
3. Enhanced Financial Disclosures
This title includes nine sections and portrays enhanced reporting requirements for financial transactions, including off-balance-sheet transactions, pro-forma figures, and stock transactions of corporate officers.
4. Analyst Conflicts of Interest
This title includes only a single section which consists of measures projected to aid restoration of investor confidence in the reporting of securities analysts.
5. Corporate Responsibility
This title includes eight sections and commands that senior executives should take responsibility for completeness and accuracy of corporate financial reports.
6. Commission Resources
This title includes four sections and depicts practices to restore confidence of investor in securities analysts.
7. Studies and Reports
This title includes five sections entails the Comptroller General and the SEC to conduct different studies and report their findings.
8. Corporate and Criminal Fraud Accountability
This title comprises of seven sections and describes specific criminal penalties for manipulation, alteration or destruction of financial records or other interference with investigations.
9. White Collar Crime Penalty Enhancement
Containing six sections, this title increases criminal politics related to white collar crimes and conspiracies.
10. Corporate Tax Returns
Containing a single section, this title requires the Chief Executive Officer to sign the company tax return
11. Corporate Fraud AccountabilityConsisting of seven sections, this title recognizes corporate fraud and tampering with records as criminal offenses as well as joins these offences to certain penalties.