What is the ‘Sarbanes-Oxley Act Of 2002 – SOX’
The Sarbanes-Oxley Act of 2002 (SOX) is an act passed by U.S. Congress in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations. The SOX Act mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. The SOX Act was created in response to accounting malpractice in the early 2000s, when public scandals such as Enron Corporation, Tyco International plc, and WorldCom shook investor confidence in financial statements and demanded an overhaul of regulatory standards.
Explaining ‘Sarbanes-Oxley Act Of 2002 – SOX’
The rules and enforcement policies outlined by the SOX Act amend or supplement existing legislation dealing with security regulations. The two key provisions of the Sarbanes-Oxley Act are Section 302 and Section 404.
An Example of SOX Implementation
Many companies have been created to help other organizations comply with the SOX Act. Workiva Inc., for example, is one such company, providing a cloud-based productivity platform that links data and builds internal controls across global enterprises. On June 7th, 2016, Integrated DNA Technologies, Inc. announced that it was using Workiva’s Wdesk platform to help it comply with the SOX Act.
Further Reading
- Did conservatism in financial reporting increase after the Sarbanes‐Oxley Act? Initial evidence – meridian.allenpress.com [PDF]
- The Sarbanes‐Oxley Act of 2002 and market liquidity – onlinelibrary.wiley.com [PDF]
- Changes in discretionary financial reporting behavior following the Sarbanes-Oxley Act – journals.sagepub.com [PDF]
- Market reaction to events surrounding the Sarbanes-Oxley Act of 2002 and earnings management – www.journals.uchicago.edu [PDF]
- Economic consequences of the Sarbanes–Oxley Act of 2002 – www.sciencedirect.com [PDF]
- Earnings restatements, the Sarbanes-Oxley Act, and the disciplining of chief financial officers – journals.sagepub.com [PDF]
- Was the Sarbanes–Oxley Act of 2002 really this costly? A discussion of evidence from event returns and going-private decisions – www.sciencedirect.com [PDF]
- The Sarbanes–Oxley Act and firms' going-private decisions – www.sciencedirect.com [PDF]
- The Sarbanes Oxley Act of 2002: Implications for compensation contracts and managerial risk-taking – papers.ssrn.com [PDF]
- Going-private decisions and the Sarbanes-Oxley Act of 2002: A cross-country analysis – academic.oup.com [PDF]
