What is SOX?

SOX or Sarbanes Oxley Act

The SOX act refers to a United States federal law that came into existence in 2002. It has set standards which are expected to be followed in corporate governance, financial reporting and auditing for all publicly listed companies under the SEC (Securities and Exchange Commission). The law was passed as a reaction to corporate governance failures and high-profile scandals. The SOX helps protect and safeguard the investors. The U.S. Securities and Exchange Commission is required to enforce the rulings on the listed companies.

Few infamous scandals which lead to forced government intervention included companies like Enron, WorldCom, Adelphia, etc.

 

The SOX is also called “Public Company Accounting Reform and Investor Protection Act” and “Corporate and Auditing Accountability and Responsibility Act”. The act has 11 sections which include guidelines from having independent auditors to accountability of individuals in case of a corporate fraud.