The Sarbanes-Oxley Act, named after its sponsors, is often referred to as "SOX" and "Sarbox," but its official name is the Public Company Accounting Reform and Investor Protection Act of 2002. This act has been hailed as the most significant change to securities laws since the 1934 Securities Exchanges Act. The Act contains sweeping reforms for issuers of public traded securities, auditors, corporate board members, and lawyers. It adopts tough new provisions intended to deter and punish corporate and accounting fraud and corruption, threatening severe penalties for wrongdoers, and protecting the interests of workers and shareholders (White House, 2002). Major provisions of the act include:
?CEOs and CFOs are held responsible for their companies' financial reports
?Executive officers and directors may not solicit or accept loans from their companies
?Insider trades are reported more quickly
?Insider trades are prohibited during pension-fund blackout periods
?Mandatory disclosure of CEO and CFO compensation and profits
?Mandatory internal audits and review and certification of those audits by outside auditors
?Protects whistleblowers
?Criminal and civil penalties for securities violations
?Longer jail sentences and larger fines for executives who intentionally misstate financial statements
I am of the opinion the Sarbanes-Oxley Act was a necessary piece of legislation to rebuild public trust in the corporate community in the wake of corporate and accounting scandals. Enron, Tyco, WorldCom, ImClone, and Arthur Andersen scandals rocked investor confidence and damaged the reputation of companies large and small. A strong central focus of the Sarbanes-Oxley Act is to enhance the integrity of the audit process and the reliability ...