Sarbanes Oxley Act

Sarbanes Oxley (SOX) refers to The Sarbanes-Oxley Act of 2002, including all sections of the law, rules and standards enacted by Congress, U.S. Securities and Exchange Commission, and the Public Company Accounting Oversight Board. Section 404 refers specifically to "management assessment of internal controls” of Sarbanes-Oxley and all the rules and standards that fall under that section.

The Sarbanes Oxley Act and rules requires new roles and responsibilities to be assigned to the audit committee. Sarbanes-Oxley requires that audit committee be responsible for outside auditor communcation, including the responsibility to appoint outside auditors to be "independent" from company management.

Here are few SOX highlights:

Improving the independence of outside auditors, including audit partner rotation and required auditor reports to the audit committee.

Forbidding officers and directors, or persons acting on their behalf, to improperly influence outside auditors.

Requiring CEOs and CFOs to certify financial and other information in their companies’ quarterly and annual reports as well as maintain, review and evaluate their disclosure controls and procedures (an additional Protection not specifically required by SOX).

Requiring CEOs and CFOs to certify to the financial statements in companies’ quarterly and annual reports, subject to criminal liability of up to $1 million and imprisonment of not more than 10 years for knowing violations, and $5 million and imprisonment of not more than 20 years for willful violations.

Prohibiting company directors and executive officers from trading during pension fund blackout periods, including the ability of the company to recover any profits in violation of the rules.

Requiring disclosure of all material off-balance sheet transactions, including a study of the same.

Requiring an annual management report on, and auditor attestation of, a company’s internal controls over financial reporting.

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