Corporate Regulation - the Sarbanes-Oxley Act of 2002 (sox)

Corporate Regulation

Corporate transparency and effective control, the reach of these words for investors and shareholders alike over the last few decades has mandated the need for corporate reform. The Sarbanes-Oxley Act of 2002 (SOX) has implemented changes within US corporations to deliver accurate and readily accessible financial statements, essential to create the transparency needed to instill market security. Substantial reform by SOX in reference to the attached penalties for providing inaccurate numbers and the independent controls that are required under SOX provide the greatest protection to shareholders and investors moving corporate compliance and market stability forward from the point where SOX was initially incepted into law in July of 2002. Amid the concerns for the SOX was particular implication for costs associated with compliance and independent controls driving the cost of public business and the ability to obtain that status for smaller companies too far out of reach limiting access to public markets.

Who, When, and Why

Shareholders for a company take many shapes and can spread from corner to corner of the globe increasing the need for stable and assured control. Protecting shareholder interest is the primary focus of the SOX section 108 defines in addition to the securities act of 1933 outlines the general outline for acceptable accounting standards; it defines who can provide accounting services based on organization and administrative action deeming it a private board controlled firm able to stand as an independent. This protects the shareholders by requiring corporations to use standard accounting principles and reporting such information within a timely manner. Section 302 orders that the reports issued by a corporation hold a degree of integrity ensured by the certification of authenticity from the signing officers. The certifications that are issued pertain to the business maintaining the proper internal controls and certifying any material changes pertaining to the change of controls within the company. Section 401 defines the required financial reporting and what specifically has to be set forth in the report. “What SOX section 404 did was to force disclosure of IC weaknesses, and then to rely on pressures that flow from such disclosures to cause companies to improve their systems” (Coates, J., Srinivasan, S. 2014)

Penalties

Section 801-805 outlines what constitutes criminal reprimand in the case of corporate deception. It pertains to deceptive actions such as destroying or altering documents that are under audit. These sections outline the penalties and what constitutes a violation,

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