Sarbanes-Oxley Act (SOX)

Sarbanes-Oxley Act (SOX)

A law passed in 2002 to reduce unethical corporate behavior and increase the accuracy of financial reporting.

Management's Responsibility under SOX

Management must certify the accuracy of financial statements and assess the effectiveness of internal controls.

Whistle-blower Protection

SOX requires firms to provide a mechanism for anonymous reporting of fraudulent activities.

Audit Committee Composition under SOX

Audit committee members must be independent of management.

Public Company Accounting Oversight Board (PCAOB)

Regulatory body with the power to oversee auditing firms and ensure compliance with rules.

Independent Board of Directors

SOX requires some members of the Board of Directors to be independent of management.

Penalties under SOX

New penalties for management if financial statements are found to be inaccurate or incomplete, including fines and imprisonment.

Enforcement of SOX

All accounting firms auditing publicly traded companies must register with the PCAOB and follow its standards.

New Rules for Auditors under SOX

Auditors can no longer provide management consulting services to their audit clients.

Key Provision Section 404 of SOX

Management must assess and report on the effectiveness of internal control over financial reporting.