The Sarbanes-Oxley (SOX Compliance) Act of 2002 mostly came about thanks to a great deal of national attention surrounding several financial and accounting scandals by major corporations in the mid-to-early 2000’s. These corporations, such as Enron, Tyco International, AIG, Adelphia, Peregrine Systems, and WorldCom were discovered to have had executives within each organization who falsified accounting records to either secretly steal money for themselves, or to disguise decreasing company earnings, which falsely maintained higher company stock prices.
As a result, most of the corporations either failed or were sold off, and left in their wake thousands unemployed and billions of dollars lost.
As a result, Congressmen Paul Sarbanes and Michael Oxley joined forces to create the SOX Act, creating an enforcement method with the goal of protecting shareholders and the general public from accounting errors and fraudulent practices in the enterprise, as well as improving the accuracy of corporate disclosures.
There are many elements of SOX compliance, all of which Nerds Support are well familiar.
● Public Company Accounting Oversight Board (PCAOB) – provides independent oversight of public accounting firms providing audit services, as well as enforcing registration of auditors, defining the specific processes and procedures for compliance audits, inspecting and policing conduct and quality control, and enforcing compliance with the specific mandates of SOX.
● Auditor Independence – establishes standards for external auditor independence to limit conflicts of interest, as well as addressing new auditor approval requirements, audit partner rotation, and auditor reporting requirements.
● Corporate Responsibility – mandates that senior executives take individual responsibility for accuracy and completeness of all corporate financial reports.
● Enhanced Financial Disclosures – sets enhanced reporting requirements for financial transactions, as well as requiring internal controls for assuring the accuracy of financial reports and disclosures.
● Analyst Conflicts of Interest – includes measures designed to help restore investor confidence in the reporting of securities analysts.
Commission Resources and Authority – defines practices to restore investor trust in securities analysts, as well as the SEC’s authority to censure or bar securities professionals from practice.
● Studies and Reports – require the Comptroller General and the SEC to perform various studies and report their findings.
● Corporate and Criminal Fraud Accountability – describes detailed criminal penalties for altering or destroying financial records, including any other interference with investigations, while providing certain protections for informants.
● White Collar Crime Penalty Enhancement – increases the criminal penalties associated with white-collar crimes and conspiracies.
● Corporate Tax Returns – states the Chief Executive Officer must sign company tax returns.
● Corporate Fraud Accountability – identifies corporate fraud and records tampering as criminal offenses, and lists to specific penalties for such offenses. The SOX Act contains several specific, severe consequences for violations of any and all specific parts of the act.
How certain are you that your organization is operating within strict SOX compliance? With Nerds Support, you will be quite certain, indeed.
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