Sarbanes-Oxley Act of 2002

Sarbanes-Oxley Act 1

A Closer Look at Sarbanes-Oxley Act

The Sarbanes-Oxley Act -- sometimes called the Public Company Accounting Reform and Investor Protection Act of 2002 , SOX or Sarbox -- was enacted and became a law on July 30 , 2002 (BoardSource , 2003 . The Act was named after Representative Michael Oxley and Senator Paul Sarbanes , its main proponents (Sarbanes-Oxley Act , 2006 . The Act was passed as a response to accounting and corporate scandals of , among others , Tyco , WorldCom , Adelphia and Enron (BoardSource , 2003 . These scandals cost investors several billions of dollars when

the companies collapsed . In a nutshell , the Act provides that companies which are publicly traded should comply with new and essential governance standards , devised to broaden the roles of board member in managing auditing procedures and financial transactions (BoardSource , 2003 . The Act is mandatory , and requires the compliance of all enterprises and organizations (Sarbanes-Oxley Act , 2006 . The U .S . Securities and Exchange Commission is tasked with the implementation of compliance rulings (Sarbanes-Oxley Act , 2006

Whereas most of the Act 's provisions apply exclusively to corporations that are publicly traded , passing the bill has become a wake-up call also to nonprofit organizations (BoardSource , 2003 . The Act is subdivided into 11 titles and , as regards to compliance , titles 302 , 401 , 404 , 409 , 802 and 906 are the most significant (Sarbanes-Oxley Act , 2006

Main Provisions

Aside from two exceptions , the Act inherently affects only American companies which are publicly traded , and regulates certain things which boards are required to do to guarantee...