Sarbanes-Oxley Act of 2002


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Sarbanes Oxley Act of 2002

Legislation in the United States, passed in 2002, intended to increase transparency in accounting practices. It was adopted in the wake of a series of scandals involving aggressive accounting on the part of a number of major accounting firms, notably Arthur Andersen. Among other provisions, it created the Public Accounting Oversight Board to regulate accounting firms that provide auditing services. It established and enhanced provisions for auditor independence and financial disclosures to limit potential conflicts of interest. It introduced a requirement that the chief executive officer must sign a corporation's tax return and enhanced punishments for white collar crime. Proponents argue that the Act has increased transparency in public accounting, while critics contend that it has driven business outside the United States.

Sarbanes-Oxley Act of 2002.

Named after its main Congressional sponsors, Senator Paul Sarbanes and Representative Michael Oxley, the Sarbanes-Oxley Act of 2002 introduced new financial practices and reporting requirements, including executive certification of financial reports, plus more stringent corporate governance procedures for publicly traded US companies. It also added protections for whistleblowers.

Officially the Corporate and Auditing Accountability, Responsibility, and Transparency Act, the law is known more colloquially as SarbOx or SOX. It was passed in response to several high-profile corporate scandals involving accounting fraud and corruption in major US corporations.

The law also created the Public Company Accounting Oversight Board (PCAOB), a private-sector, nonprofit corporation that regulates and oversees public accounting firms.

The law has seen its share of controversy, with opponents arguing that the expense and effort involved in complying with the law reduce shareholder value, and proponents arguing that increased corporate responsibility and transparency far outweigh the costs of compliance.

Sarbanes-Oxley Act of 2002 (SOX)

Also known as the Public Company Accounting Reform and Investor Protection Act of 2002.This Act is a federal law that was passed in response to the major accounting scandals and resulting corporate crashes in the beginning years of the twenty-first century. The law imposes enhanced accounting and disclosure standards on public companies, including REITs. In particular, the balance-sheet treatment of real estate values to reflect economic obsolescence,potential contamination,and short-term lease expirations with key tenants are critical issues.It has an indirect impact on private companies because many insurers and lenders are imposing the same requirements on all customers. Further, an exit strategy that depends on selling real estate assets to public companies will need to implement SOX-compliant controls early to facilitate due diligence and obtain the highest price.

References in periodicals archive ?
The Sarbanes-Oxley Act of 2002 strongly encourages well-developed corporate governance practices within corporations.
A study by Financial Executives International, a not-for-profit organization, broke down the actual costs to comply with the Sarbanes-Oxley Act of 2002 in the first year and compared those numbers to an earlier survey on expected compliance costs.
This is the latest delay of the requirement included in Section 404 of the Sarbanes-Oxley Act of 2002 (SOX).
of Illinois), the Sarbanes-Oxley Act of 2002 has the potential for turning into a "litigation time-bomb." In this text, they suggest some major changes to the Act that are aimed at minimizing the costs of compliance--costs that get passed on to the ordinary investors it is designed to protect.
In 1985, the private sector took a big step toward better self-regulation through the formation of the National Commission on Fraudulent Financial Reporting, the "Treadway Commission." The commission's organizer, the Committee of Sponsoring Organizations (COSO), made up of five major professional organizations--Financial Executives International, The Institute of Internal Auditors, AICPA, National Association of Accountants (now the Institute of Management Accountants) and American Accounting Association--set benchmarks for internal controls, de facto standards used to comply with SEC regulations and, later, the Sarbanes-Oxley Act of 2002.
Owing to section 404 of the Sarbanes-Oxley Act of 2002 and some high-profile documentation failures, tax processes and documentation have greater visibility.
The far-reaching Sarbanes-Oxley Act of 2002, which established broad new financial reporting requirements for public companies and reestablished the value of auditing and attestation, has created strong demand for public accountants.
PeriscopeiQ, a provider of Web-based assessment solutions, has announced the availability of a product called DISCLOSURE, a risk assessment and management solution designed to meet the compliance requirements of Section 302 of the Sarbanes-Oxley Act of 2002. Based on a secure Web portal, DISCLOSURE enables companies to know what is affecting their financial results in a range of areas, from legal matters and policy violations to off-balance sheet transactions and Securities and Exchange Commission updates.
Although the Sarbanes-Oxley Act of 2002 (SOA) currently affects only public companies, many state legislatures are recommending "Sarbanes-like" provisions for nonprofit organizations.
Also, Section 402 of the Sarbanes-Oxley Act of 2002 puts splitdollar plans into question because it prohibits public companies from extending credit in the form of personal loans to their officers and directors.
"Retaining Business Records: Directives and Implications of the Sarbanes-Oxley Act of 2002 and Lessons of the Arthur Andersen Criminal Prosecution for Destruction of Its Enron Audit Documents." Heller Ehrman White & McAuliffe LLP.
The Sarbanes-Oxley Act of 2002, among other provisions, made CEOs and chief financial officers personally responsible for ensuring the accuracy of financial reporting.