What is SOX?
The Sarbanes-Oxley Act (SOX) was passed in 2002 by the U.S. Congress in order to protect shareholders and the general public from accounting errors and fraudulent practices in enterprises, as well as to improve the accuracy of corporate disclosures. It established strict financial reporting and security protocols within publicly traded companies.
Challenge of addressing SOX Compliance
All public companies are required to comply with the Sarbanes-Oxley Act (SOX), a U.S. regulation designed to protect the general public and shareholders from fraudulent accounting practices, prompted by a series of high-profile corporate financial scandals in 2002. SOX compliance is mandatory and intended to enforce corporate governance and accountability through comprehensive internal checks and balances. The act demands extensive and expensive recording standards, as well as enforces steep fines for non-compliance.
Sarbanes Oxley requires all publicly traded companies to report their internal accounting controls to the Securities and Exchange Commission (SEC), calling on the CEO and CFO to personally attest to the completion and accuracy of their records. Failure to comply with SOX compliance can lead to significant personal fines for senior executives and even jail time. To ensure measures for transparency, Sarbanes Oxley enhances whistleblower protections to encourage the reporting of illegal activities that may not be exposed readily or through a SOX audit. The act gives the U.S. Department of Justice authority to criminally charge employers who retaliate against whistleblowers.
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