The Sarbanes-Oxley Act of 2002 (SOX) is a U.S. federal law aimed at improving corporate governance and accountability. It’s designed to protect investors from fraudulent financial reporting by corporations. By emphasizing increased transparency in financial reporting. SOX also holds executives accountable for their companies’ financial disclosures.
Key regulatory requirements:
- Corporate Responsibility for Financial Reports: Senior management must certify the accuracy of reported financial statements.
- Management Assessment of Internal Controls: Management and the external auditor must report on the adequacy of a company’s internal controls over financial reporting.
- Recordkeeping: SOX includes requirements relating to the destruction, alteration, or falsification of records.
- Penalties for Wrongful Certifications: Penalties are imposed for certifying misleading or fraudulent financial reports.
The Securities and Exchange Commission (SEC) is the primary regulatory body for SOX, overseeing the audits of public companies. Violations for willful violations or misrepresentations can include criminal and civil penalties.
