SARBANES-OXLEY ACT OF 2002
- The Sarbanes-Oxley Act of 2002 (often shortened to SOX) is legislation passed by the U.S. Congress to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise, as well as improve the accuracy of corporate disclosures.
- The Sarbanes-Oxley Act was enacted in response to a series of high-profile financial scandals that occurred in the early 2000s at companies including Enron, WorldCom and Tyco that rattled investor confidence. The act was aimed at improving corporate governance and accountability. Now, all public trading companies must comply with SOX.
- SOX not only affects the financial side of corporations, but also IT departments charged with storing a corporation’s electronic records.
- The act is not a set of business practices and does not specify how a business should store records; rather, it defines which records should be stored and for how long.
- SOX 802 states that all business records, including electronic records and electronic messages, must be saved for “not less than five years.” The consequences for noncompliance are fines, imprisonment or both.
- The U.S. Securities and Exchange Commission (SEC)administers the act, which sets deadlines for compliance, and publishes rules on requirements.
- The Public Company Accounting Oversight Board (PCAOB), commonly pronounced “peekaboo”) is a private-sector, nonprofit corporation that helps established auditing standard and best practices. http://pcaobus.org/Pages/default.aspx
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