Sarbanes-Oxley Act Of 2002 - SOX


DEFINITION of 'Sarbanes-Oxley Act Of 2002 - SOX'

An act passed by U.S. Congress in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations. The Sarbanes-Oxley Act (SOX) mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. SOX was enacted in response to the accounting scandals in the early 2000s. Scandals such as Enron, Tyco, and WorldCom shook investor confidence in financial statements and required an overhaul of regulatory standards.


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BREAKING DOWN '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:

1. Section 302: A mandate that requires senior management to certify the accuracy of the reported financial statement
2. Section 404: A requirement that management and auditors establish internal controls and reporting methods on the adequacy of those controls. Section 404 had very costly implications for publicly traded companies as it is expensive to establish and maintain the required internal controls.

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  1. Where did market to market (MTM) accounting come from?

    Mark to market accounting has been around in concept since the stock market began; however, it was not officially part of ... Read Full Answer >>
  2. Why is market to market (MTM) accounting considered controversial?

    Mark to market accounting has been an integral component of generally accepted accounting principles (GAAP) in the United ... Read Full Answer >>
  3. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  4. What is the difference between the Sarbanes-Oxley Act and the Dodd-Frank Act?

    The Sarbanes-Oxley Act (SOX) was enacted to protect investors from potential fraudulent accounting by companies, whereas ... Read Full Answer >>
  5. How did Sarbanes Oxley (SOX) affect the rules and regulations for account reconciliation?

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  6. What impact does government regulation have on the financial services sector?

    Government regulation affects the financial services industry in many ways, but the specific impact depends on the nature ... Read Full Answer >>
  7. What are the GAAP standards for digital document storage?

    According to Sarbanes Oxley Act (SOX), companies are required to keep all documents that contain information about a company's ... Read Full Answer >>

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