The Sarbanes-Oxley Act (SOX)
The Sarbanes-Oxley Act (SOX) was signed into law on 30th July 2002, and introduced highly significant legislative changes to financial practice and corporate governance regulation. It introduced stringent new rules with the stated objective: “to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws”.
The act is actually named after its main architects, Senator Paul Sarbanes and Representative Michael Oxley, and of course followed a series of very high profile scandals, such as Enron. It is also intended to “deter and punish corporate and accounting fraud and corruption, ensure justice for wrongdoers, and protect the interests of workers and shareholders” (Quote: President Bush).
The Sarbanes-Oxley Act itself is organized into eleven titles, although sections 302, 404, 401, 409, 802 and 906 are the most significant with respect to compliance (Sarbanes Oxley section 404 seems to cause most concern) and internal control. In addition, the Act also created a public company accounting board.
Currently, the Sarbanes-Oxley Act requires Canadian companies that trade on U.S. stock exchanges to hire external auditors to audit their internal control systems and file a report of the findings.