Friday, September 15, 2006

What is Sarbanes-Oxley?

Well the Sarbanes Oxley-Act of 2002 is a set of complex regulations that is considered to be one of the most important business reform acts since 1934. The Act combines bills that were drafted by Senator Paul Sarbanes (D- Maryland- The Chairperson of the Senate Committee on Banking, Housing, and Urban Affairs) and Congressman Michael Oxley (R-Ohio - The Chairperson of the House of Committee on Financial Services) designed to enforce corporate accountability and responsibility. Congress ( The house passed the bill 334-90 while the Senate passed it 97 to 0) quickly enacted the bill to restore confidence in corporate America, where a plunging stock prices, increased corporate fraud and numerous corporate scandals (Enron, Aldelphia Communications and many more), not to mention a record number of corporate bankruptcies, have had a negative impact on the economy. This law has granted the SEC increased regulatory control, lengthened the statute of limitations and imposed greater criminal and compensatory punishment on executives and companies that do not comply.

The findings from Report of the National Commission on Fraudulent Financial Reporting (Coso, 1987) were the basis of the framework of SOX (Sarbanes-Oxley Act of 2002). If was formally called the Public Company Accounting Reform and Investor Proctection Act of 2002. It was signed into law by President George W Bush on July 30, 2002.

The tracings of this law can go all the way back to the Depression era with roots including the Securities Act of 1933 which is more commonly known as the "Truth in Securities" law.

We will discuss this more later..


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