What is the Sarbanes-Oxley Act (SOX)?

The Sarbanes-Oxley Act (SOX) is a federal law of the United States that was passed in 2002 in response to a number of corporate scandals such as Enron and WorldCom. SOX contains eleven titles that cover topics such as corporate responsibility, auditor independence, and financial disclosures. Title I of SOX is the Public Company Accounting Reform and Investor Protection Act. This title requires publicly traded companies to create a framework for their internal financial controls, to discourage fraud and deception. It also requires independent auditors to review and certify the accuracy of financial information. Title II of SOX is known as the Corporate and Auditing Accountability and Responsibility Act. This title requires senior executives to certify the accuracy of their company’s financial reports as well as their compliance with laws and regulations. It also prohibits auditors from providing non-audit services to their audit clients. Title III of SOX is the Auditor Independence Act which requires the Securities and Exchange Commission (SEC) to establish rules and regulations to promote auditor independence. It establishes minimum qualifications for those who audit public companies and provides penalties for auditors who breach the requirements of independence. Finally, Title IV of SOX is the Fair Disclosure Act and it requires public companies to make public all material information regarding their financial condition at the same time so as to ensure that investors have access to the same information. Overall, the Sarbanes-Oxley Act of 2002 seeks to protect shareholders and the public investors by imposing greater accountability and transparency in the corporate environment.

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What is the Sarbanes-Oxley Act (SOX)?

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