Sarbanes-Oxley Act of 2002

Sarbanes-Oxley Act of 2002

Lillie E. Lowman

ACC 561

June 17, 2013

Donald Schroedle

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002, also known as SOX, which is a United States Federal Law enacted on July 30, 2002, as a reaction to a number of major corporate and accounting scandals. Its general purpose was to ensure “full fair and accurate” financial disclosure by corporations. Most were notably affecting the Enron and WorldCom companies among others. These different scandals, which have cost investors several billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation’s securities markets. This act is named after the U.S. Senator Paul Sarbanes and the U.S. Representative Michael G. Oxley, and where the act was approved by the House. The Sarbanes-Oxley consists of 11 titles which describe the main aspects and requirements for financial reporting.

Public Company Accounting Oversight Board (PCAOB)

Title 1 consists of nine sections and establishes the Public Company Accounting Oversight Board, to provide independent oversight of public accounting firms providing audit services (auditors). It also creates a central oversight board tasked with registering auditors, defining the specific processes and procedures for compliance audits, inspecting and policing conduct and quality control, and enforcing compliance with the specific mandates of SOX. Its stated purpose is to "protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports". Although a private entity, the PCAOB has many government-like regulatory functions, making it in some ways similar to the private "self-regulatory organizations" (SROs) which regulate stock markets, broker-dealers, etc. in the United States. In conversation, the PCAOB is often pronounced "peekaboo".

Auditor Independence

Title 2 consists of nine sections and established standards...