![]() While the Act lays down detailed requirements for the governance of organizations, the three highest profile sections are 302, 404, and 409. SOX applies to all US public companies and the Certified Public Accountants (CPAs) and CPA firms that provide them with auditing services. Financial information must now be certified by management and criminal penalties for fraudulent financial activity are now much more severe. SOX changes the way corporate boards and executives work, making them accountable for the accuracy of financial statements and removing the defense of board-level ignorance. Why was the Act needed, and who does it apply to?įollowing a number of high-profile corporate and accounting scandals-including the collapse of various large organizations including Enron, Tyco and WorldCom-as well as the bursting of the dot-com bubble in the late 1990s, SOX was introduced to restore confidence in the accuracy of the financial information released by public companies. The Sarbanes–Oxley Act, often referred to simply as "SOX," is a US federal law enacted in July 2002 with the aim of improving the accuracy and reliability of financial disclosures for all US public company boards, management, and public accounting firms.
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