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2002: Sarbanes-Oxley Act

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  • 2002: Sarbanes-Oxley Act

    The Sarbanes-Oxley, SOX or SarBox Act, is a law pertaining to accountability for public companies relating to financial information. This act is designed to protect investors and the public by increasing the accuracy and reliability of corporate disclosures. The key requirements and provisions of the Sarbanes-Oxley Act are organized into the following titles:

    Title 1
    The Public Company Accounting Oversight Board (PCAOB) establishes to provide independent oversight of public accounting firms providing audit services.

    Title 2
    Auditor independence establishes standards for external auditor independence to limit conflicts of interest and addresses new auditor approval requirements, audit partner rotation and auditor reporting requirements.

    Title 3
    Corporate responsibility mandates that senior executives take individual responsibility for the accuracy and completeness of corporate financial reports.

    Title 4
    Enhanced financial disclosures describes enhanced reporting requirements for financial transactions, including off-balance-sheet transactions, proforma figures and stock transactions of corporate officers.

    Title 5
    Analyst conflicts of interest consists of measures designed to help restore investor confidence in the reporting of securities analysts.

    Title 6
    Commission resources and authority defines practices to restore investor confidence in securities analysts.

    Title 7
    Studies and reports include the effects of consolidation of public accounting firms, the role of credit rating agencies in the operation of securities markets, securities violations and enforcement actions, and whether investment banks assisted Enron, Global Crossing and others to manipulate earnings and obfuscate true financial conditions.

    Title 8
    Corporate and criminal fraud accountability describes specific criminal penalties for fraud by manipulation, destruction or alteration of financial records or other interference with investigations while providing certain protections for whistle blowers.

    Title 9
    White collar crime penalty enhancement increased the criminal penalties associated with white collar crimes and conspiracies. It recommends stronger sentencing guidelines and specifically adds failure to certify corporate financial reports as a criminal offense.

    Title 10
    Corporate tax returns states that the Chief Executive Officer should sign the company tax return.

    Title 11
    Corporate fraud accountability identifies corporate fraud and records tampering as criminal offenses and join those offenses to specific penalties. It also revises sentencing guidelines and strengthens their penalties. This enables the SEC to temporarily freeze large or unusual payments.
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