Submitted by: Submitted by willp1294
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Category: Business and Industry
Date Submitted: 07/31/2016 05:28 PM
Sarbanes-Oxley Act (SOX)
Sarbanes Oxley Act (2002)
- Federal oversight of corporate accounting
- applies to all publicly traded corporations based in U.S. if over 75 million in gross revenue.
- and all foreign companies in U.S. stock exchange
What is Sox?
-Response to corporate scandals:
- created Public Company Accounting Oversight Board (PCAOB)
- monitors firms that audit public corporations
- establishes standards and rules of auditors in public corporations
- board has investigatory and disciplinary over security analysts and auditors who issue reports about corporations
-Requires CFO's and CEO's to certify financial statements
- Requires 'audit committees' with independent members (no financial interest), sit within corporations
- Disallows loans by corporations to board members or officers of the corporation
- Requires each corporation to register a Code of Ethics for Officers with the SEC
- Accounting firms cannot provide both auditing and consulting services to single client, without exception from the clients independent auditors
- Requires attorneys to report wrong doing to managers and board of directors if necessary
- Provides protection from Whistleblowers (a person who informs on a person or organization engaged in an illicit activity.)
- Financial analysts must certify recommendations about the corporation are based on objective information. (not inside information that is not reported to public)
- Requires 'revolving' auditors that move from one account to another over time(can't stay on the same account) (about 6 years)
Is SOX too costly?
-According to the Business Ethics textbook, the cost of compliance with SOX is about 1 million dollars per one billion revenue.
- The costs have caused companies not to list with the SEC and delist in the stock exchange.
- Some start-up companies have not taken off because of demands of SOX is not knowing to them or too great.