The Sarbanes-Oxley Act, often referred to as the SOX Act, was signed into law in 2002. It is named for its sponsors in the US Congress, Senator Paul Sarbanes of Maryland and Representative Michael Oxley of Ohio. In 11 sections, called titles, the law established new legal requirements or expanded existing ones for all publicly held companies in the US and some private ones. These requirements apply to a company’s board of directors, management firms, and accounting firms. Along with identifying specific responsibilities of the board, the law establishes specific criminal penalties that apply to specific offenses. It also requires that the U.S. Securities and Exchange Commission (SEC) create a set of regulations regarding the companies’ legal responsibility to comply with the law.
The SOX’s first three titles establish the new Public Company Accounting Oversight Board (PCAOB), establish standards for auditor independence, and mandate corporate senior executives’ responsibility. Titles 4 through 6 require enhanced financial disclosures, define codes of conduct and reporting procedures for analysts, and identify SEC resources and authority regarding censuring or barring professionals.
The seventh title identifies studies and reports that the SEC and Comptroller General must perform. Titles 8 and 9 are concerned with criminal penalties related to corporate fraud and white collar crime; along with recommending stiffer sentencing, they provide whistle-blower protection.
Title 10 requires the company CEO to sign its tax return. The eleventh and final title, concerned with corporate fraud accountability, identifies accounting fraud as criminal activity and specifies related penalties and sentences.