Sarbanes–Oxley Act

From Wikipedia, the free encyclopedia

Jump to: navigation, search

Accountancy
Key concepts
Accountant · Bookkeeping · Trial balance · General ledger · Debits and credits · Cost of goods sold · Double-entry system · Standard practices · Cash and accrual basis · GAAP / IFRS
Financial statements
Balance sheet · Income statement · Cash flow statement · Equity · Retained earnings
Auditing
Financial audit · GAAS · Internal audit · Sarbanes–Oxley Act · Big Four auditors
Fields of accounting
Cost · Financial · Forensic · Fund · Management · Tax
This box: view • talk • edit

Before the signing ceremony of the Sarbanes–Oxley Act, President George W. Bush met with Senator Paul Sarbanes, Secretary of Labor Elaine Chao and other dignitaries in the Blue Room at the White House on July 30, 2002

The Sarbanes–Oxley Act of 2002 (Pub.L. 107-204, 116 Stat. 745, enacted July 30, 2002), also known as the 'Public Company Accounting Reform and Investor Protection Act' (in the Senate) and 'Corporate and Auditing Accountability and Responsibility Act' (in the House) and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002. It is named after sponsors U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH).

The bill was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation's securities markets.

The legislation set new or enhanced standards for all U.S. public company boards, management and public accounting firms. It does not apply to privately held companies. The act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. Harvey Pitt, the 26th chairman of the Securities and Exchange Commission (SEC), led the SEC in the adoption of dozens of rules to implement the Sarbanes–Oxley Act. It created a new, quasi-public agency, the Public Company Accounting Oversight Board, or PCAOB, charged with overseeing, regulating, inspecting and disciplining accounting firms in their roles as auditors of public companies. The act also covers issues such as auditor independence, corporate governance, internal control assessment, and enhanced financial disclosure.

The act was approved by the House by a vote of 423-3 and by the Senate 99-0. President George W. Bush signed it into law, stating it included "the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt."^[1]

Debate continues over the perceived benefits and costs of SOX. Supporters contend the legislation was necessary and has played a useful role in restoring public confidence in the nation's capital markets by, among other things, strengthening corporate accounting controls. Opponents of the bill claim it has reduced America's international competitive edge against foreign financial service providers, saying SOX has introduced an overly complex regulatory environment into U.S. financial markets.^[2]

Contents

[hide]

• 1 Overview
• 2 History and context: events contributing to the adoption of Sarbanes–Oxley
  • 2.1 Timeline and passage of Sarbanes–Oxley
• 3 Analyzing the cost-benefits of Sarbanes–Oxley
  • 3.1 Compliance costs
  • 3.2 Benefits to firms and investors
  • 3.3 Effects on exchange listing choice of non-US companies
• 4 Implementation of key provisions
  • 4.1 Sarbanes–Oxley Section 302: Disclosure controls
  • 4.2 Sarbanes–Oxley Section 404: Assessment of internal control
  • 4.3 Sarbanes–Oxley 404 and smaller public companies
  • 4.4 Sarbanes–Oxley Section 802: Criminal penalties for violation of SOX
  • 4.5 Sarbanes–Oxley Section 1107: Criminal penalties for retaliation against whistleblowers
• 5 Criticism
• 6 Praise
• 7 Legal challenges
• 8 Legislative information
• 9 See also
  • 9.1 Similar laws in other countries
• 10 References
• 11 External links

The

Sarbanes-Oxley Act of 2002

Table of Contents

---

Sarbanes-Oxley Act of 2002 in PDF (suitable for printing).

Tables -- An Index of Sections Affected by the Sarbanes-Oxley Act of 2002.

---

Section 1 -- Short title

Section 2 -- Definitions

Section 3 -- Commission Rules and Enforcement

TITLE I

PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

Section 101 -- Establishment; Administrative Provisions

Section 102 -- Registration with the Board

Section 103 -- Auditing, Quality Control, and Independence Standards and Rules

Section 104 -- Inspections of Registered Public Accounting Firms

Section 105 -- Investigations and Disciplinary Proceedings

Section 106 -- Foreign Public Accounting Firms

Section 107 -- Commission Oversight of the Board

Section 108 -- Accounting Standards

Section 109 -- Funding

TITLE II

AUDITOR INDEPENDENCE

Section 201 -- Services Outside the Scope of Practice of Auditors

Section 202 -- Preapproval Requirements

Section 203 -- Audit Partner Rotation

Section 204 -- Auditor Reports to Audit Committees

Section 205 -- Conforming Amendments

Section 206 -- Conflicts of Interest

Section 207 -- Study of Mandatory Rotation of Registered Public Accounting Firms

Section 208 -- Commission Authority

Section 209 -- Considerations by Appropriate State Regulatory Authorities

TITLE III

CORPORATE RESPONSIBILITY

Section 301 -- Public Company Audit Committees

Section 302 -- Corporate Responsibility for Financial Reports

Section 303 -- Improper Influence on Conduct of Audits

Section 304 -- Forfeiture of Certain Bonuses and Profits

Section 305 -- Officer and Director Bars and Penalties

Section 306 -- Insider Trades During Pension Fund Blackout Periods

Section 307 -- Rules of Professional Responsibility for Attorneys

Section 308 -- Fair Funds for Investors

TITLE IV

ENHANCED FINANCIAL DISCLOSURES

Section 401 -- Disclosures in Periodic Reports

Section 402 -- Enhanced Conflict of Interest Provisions

Section 403 -- Disclosures of Transactions Involving Management and Principal Stockholders

Section 404 -- Management Assessment of Internal Controls

Section 405 -- Exemption

Section 406 -- Code of Ethics for Senior Financial Officers

Section 407 -- Disclosure of Audit Committee Financial Expert

Section 408 -- Enhanced Review of Periodic Disclosures by Issuers

Section 409 -- Real Time Issuer Disclosures

TITLE V

ANALYST CONFLICTS OF INTEREST

Section 501 -- Treatment of Securities Analysts by Registered Securities Associations and National Securities Exchanges

TITLE VI

COMMISSION RESOURCES AND AUTHORITY

Section 601 -- Authorization of Appropriations

Section 602 -- Appearance and Practice Before the Commission

Section 603 -- Federal Court Authority to Impose Penny Stock Bars

Section 604 -- Qualifications of Associated Persons of Brokers and Dealers

TITLE VII

STUDIES AND REPORTS

Section 701 -- GAO Study and Report Regarding Consolidation of Public Accounting Firms

Section 702 -- Commission Study and Report Regarding Credit Rating Agencies

Section 703 -- Study and Report on Violators and Violations

Section 704 -- Study of Enforcement Actions

Section 705 -- Study of Investment Banks

TITLE VIII

CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY

Section 801 -- Short Title

Section 802 -- Criminal Penalties for Altering Documents

Section 803 -- Debts Nondischargeable if Incurred in Violation of Securities Fraud Laws

Section 804 -- Statute of Limitations for Securities Fraud

Section 805 -- Review of Federal Sentencing Guidelines for Obstruction of Justice and Extensive Criminal Fraud

Section 806 -- Protection for Employees of Publicly Traded Companies Who Provide Evidence of Fraud

Section 807 -- Criminal Penalties for Defrauding Shareholders of Publicly Traded Companies

TITLE IX

WHITE-COLLAR CRIME PENALTY ENHANCEMENTS

Section 901 -- Short Title

Section 902 -- Attempts and Conspiracies to Commit Criminal Fraud Offenses

Section 903 -- Criminal Penalties for Mail and Wire Fraud

Section 904 -- Criminal Penalties for Violations of the Employee Retirement Income Security Act of 1974

Section 905 -- Amendment to Sentencing Guidelines Relating to Certain White-Collar Offenses

Section 906 -- Corporate Responsibility for Financial Reports

TITLE X

CORPORATE TAX RETURNS

Section 1001 -- Sense of the Senate Regarding the Signing of Corporate Tax Returns by Chief Executive Officers

TITLE XI

CORPORATE FRAUD AND ACCOUNTABILITY

Section 1101 -- Short Title

Section 1102 -- Tampering with a Record or Otherwise Impeding an Official Proceeding

Section 1103 -- Temporary Freeze Authority for the Securities and Exchange Commission

Section 1104 -- Amendment to the Federal Sentencing Guidelines

Section 1105 -- Authority of the Commission to Prohibit Persons from Serving as Officers or Directors

Section 1106 -- Increased Criminal Penalties under Securities Exchange Act of 1934

Section 1107 -- Retaliation Against Informants

SOURCE