brief history of sox

7/21/2019 Brief History of SOX

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Brief History of SOX

The Sarbanes–Oxley Act of 2002 (Pub.L. 107–204, 11 Stat. 74!, enacte" #uly $0,

2002%, also &no'n as the Publ)c *o+any Account)n- efor+ an" /nestor

Protect)on Act ()n the Senate% an" *ororate an" Au")t)n- Accountab)l)ty an"

esons)b)l)ty Act ()n the ouse% an" +ore co++only calle" Sarbanes–Oxley,Sarbox or SO, )s a 3n)te" States fe"eral la' that set ne' or enhance" stan"ar"s

for all 3.S. ubl)c co+any boar"s, +ana-e+ent an" ubl)c account)n- r+s.

The b)ll, 'h)ch conta)ns eleen sect)ons, 'as enacte" as a react)on to a nu+ber of

+a5or cororate an" account)n- scan"als, )nclu")n- 6nron, an" orl"co+. The

sect)ons of the b)ll coer resons)b)l)t)es of a ubl)c cororat)on8s boar" of ")rectors,

a""s cr)+)nal enalt)es for certa)n +)scon"uct, an" re9u)re" the Secur)t)es an"

6xchan-e *o++)ss)on to create re-ulat)ons to "ene ho' ubl)c cororat)ons are to

co+ly ')th the la'.

Sarbanes–Oxley 'as na+e" after sonsors 3.S. Senator Paul Sarbanes (:;<:% an"

3.S. eresentat)e <)chael =. Oxley (;O%. As a result of SO, to +ana-e+ent

+ust )n"))"ually cert)fy the accuracy of nanc)al )nfor+at)on. /n a"")t)on, enalt)es

for frau"ulent nanc)al act))ty are +uch +ore seere. Also, SO )ncrease" the

oers)-ht role of boar"s of ")rectors an" the )n"een"ence of the outs)"e au")tors

'ho re)e' the accuracy of cororate nanc)al state+ents.

The b)ll, 'h)ch conta)ns eleen sect)ons, 'as enacte" as a react)on to a nu+ber of

+a5or cororate an" account)n- scan"als, )nclu")n- those a>ect)n- 6nron, Tyco

/nternat)onal, A"elh)a, Pere-r)ne Syste+s, an" orl"*o+. These scan"als cost

)nestors b)ll)ons of "ollars 'hen the share r)ces of a>ecte" co+an)es collase"

an" shoo& ubl)c con"ence )n the 3S secur)t)es +ar&ets.

The act conta)ns eleen t)tles, or sect)ons, ran-)n- fro+ a"")t)onal cororate boar"

resons)b)l)t)es to cr)+)nal enalt)es, an" re9u)res the Secur)t)es an" 6xchan-e

*o++)ss)on (S6*% to )+le+ent rul)n-s on re9u)re+ents to co+ly ')th the la'.arey P)tt, the 2th cha)r+an of the S6*, le" the S6* )n the a"ot)on of "o?ens of

rules to )+le+ent the Sarbanes–Oxley Act. /t create" a ne', 9uas);ubl)c a-ency,

the Publ)c *o+any Account)n- Oers)-ht @oar", or P*AO@, char-e" ')th

oersee)n-, re-ulat)n-, )nsect)n-, an" ")sc)l)n)n- account)n- r+s )n the)r roles as

au")tors of ubl)c co+an)es. The act also coers )ssues such as au")tor

)n"een"ence, cororate -oernance, )nternal control assess+ent, an" enhance"

nanc)al ")sclosure. The nonrot ar+ of )nanc)al 6xecut)es /nternat)onal (6/%,



co+l)ance au")ts, )nsect)n- an" ol)c)n- con"uct an" 9ual)ty control, an"

enforc)n- co+l)ance ')th the sec)c +an"ates of SO.

Auditor "ndependence

T)tle // cons)sts of n)ne sect)ons an" establ)shes stan"ar"s for external au")tor

)n"een"ence, to l)+)t conI)cts of )nterest. /t also a""resses ne' au")tor aroal

re9u)re+ents, au")t artner rotat)on, an" au")tor reort)n- re9u)re+ents. /t restr)cts

au")t)n- co+an)es fro+ ro)")n- non;au")t ser)ces (e.-., consult)n-% for the sa+e

cl)ents.

Corporate #esponsibility

T)tle /// cons)sts of e)-ht sect)ons an" +an"ates that sen)or execut)es ta&e

)n"))"ual resons)b)l)ty for the accuracy an" co+leteness of cororate nanc)al

reorts. /t "enes the )nteract)on of external au")tors an" cororate au")t

co++)ttees, an" sec)es the resons)b)l)ty of cororate oJcers for the accuracy

an" al)")ty of cororate nanc)al reorts. /t enu+erates sec)c l)+)ts on the

beha)ors of cororate oJcers an" "escr)bes sec)c forfe)tures of benets an" c))l

enalt)es for non;co+l)ance. or exa+le, Sect)on $02 re9u)res that the co+any8s

r)nc)al oJcers (ty)cally the *h)ef 6xecut)e OJcer an" *h)ef )nanc)al OJcer%

cert)fy an" aroe the )nte-r)ty of the)r co+any nanc)al reorts 9uarterly.E!F

$nhanced %inancial &isclosures

T)tle /K cons)sts of n)ne sect)ons. /t "escr)bes enhance" reort)n- re9u)re+ents for

nanc)al transact)ons, )nclu")n- o>;balance;sheet transact)ons, ro;for+a -ures

an" stoc& transact)ons of cororate oJcers. /t re9u)res )nternal controls for assur)n-

the accuracy of nanc)al reorts an" ")sclosures, an" +an"ates both au")ts an"

reorts on those controls. /t also re9u)res t)+ely reort)n- of +ater)al chan-es )n

nanc)al con")t)on an" sec)c enhance" re)e's by the S6* or )ts a-ents of

cororate reorts.

Analyst Con'icts of "nterest

T)tle K cons)sts of only one sect)on, 'h)ch )nclu"es +easures "es)-ne" to hel

restore )nestor con"ence )n the reort)n- of secur)t)es analysts. /t "enes the

co"es of con"uct for secur)t)es analysts an" re9u)res ")sclosure of &no'able

conI)cts of )nterest.

Commission #esources and Authority

T)tle K/ cons)sts of four sect)ons an" "enes ract)ces to restore )nestor con"ence

)n secur)t)es analysts. /t also "enes the S6*8s author)ty to censure or bar secur)t)es

rofess)onals fro+ ract)ce an" "enes con")t)ons un"er 'h)ch a erson can be

barre" fro+ ract)c)n- as a bro&er, a")sor, or "ealer.



Studies and #eports

T)tle K// cons)sts of e sect)ons an" re9u)res the *o+troller =eneral an" the S6*

to erfor+ ar)ous stu")es an" reort the)r n")n-s. Stu")es an" reorts )nclu"e the

e>ects of consol)"at)on of ubl)c account)n- r+s, the role of cre")t rat)n- a-enc)es

)n the oerat)on of secur)t)es +ar&ets, secur)t)es )olat)ons, an" enforce+entact)ons, an" 'hether )nest+ent ban&s ass)ste" 6nron, =lobal *ross)n-, an" others

to +an)ulate earn)n-s an" obfuscate true nanc)al con")t)ons.

Corporate and Criminal %raud Accountability

T)tle K/// cons)sts of seen sect)ons an" )s also referre" to as the *ororate an"

*r)+)nal rau" Accountab)l)ty Act of 2002. /t "escr)bes sec)c cr)+)nal enalt)es

for +an)ulat)on, "estruct)on or alterat)on of nanc)al recor"s or other )nterference

')th )nest)-at)ons, 'h)le ro)")n- certa)n rotect)ons for 'h)stle;blo'ers.

(hite Collar Crime Penalty $nhancement

T)tle / cons)sts of s)x sect)ons. Th)s sect)on )s also calle" the h)te *ollar *r)+e

Penalty 6nhance+ent Act of 2002. Th)s sect)on )ncreases the cr)+)nal enalt)es

assoc)ate" ')th 'h)te;collar cr)+es an" cons)rac)es. /t reco++en"s stron-er

sentenc)n- -u)"el)nes an" sec)cally a""s fa)lure to cert)fy cororate nanc)al

reorts as a cr)+)nal o>ense.

Corporate )a* #eturns

T)tle cons)sts of one sect)on. Sect)on 1001 states that the *h)ef 6xecut)e OJcer

shoul" s)-n the co+any tax return.

Corporate %raud Accountability

T)tle / cons)sts of seen sect)ons. Sect)on 1101 reco++en"s a na+e for th)s t)tle as

*ororate rau" Accountab)l)ty Act of 2002. /t )"ent)es cororate frau" an"

recor"s ta+er)n- as cr)+)nal o>enses an" 5o)ns those o>enses to sec)c

enalt)es. /t also re)ses sentenc)n- -u)"el)nes an" stren-thens the)r enalt)es. Th)s

enables the S6* to resort to te+orar)ly free?)n- transact)ons or ay+ents that

hae been "ee+e" lar-e or unusual.

brief history of sox

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