What is Sox Regulation?
The Sarbanes-Oxley Act of 2002, sometimes known as SOX or Sarbox, is a United States law designed to protect investors from corporate accounting fraud. The law imposes severe measures to improve corporate financial transparency and avoid accounting fraud. The act implemented new rules for corporations, such as setting new auditor standards to reduce conflicts of interest and transferring responsibility for the complete and accurate handling of financial reports.
Example of Sox Regulation:
This regulation had several critical practical implications:
- CFOs and CEOs must personally verify and certify the accuracy of financial filings with the SEC.
- CFOs and CEOs must attest that all disclosures provide an accurate picture of the firm.
- The firm’s reporting procedures and internal controls must be audited annually.
Why is Sox Regulation necessary?
SOX compliance is critical in the most basic sense because it is the law. Public corporations have no choice but to abide by all applicable parts. Noncompliance is illegal, and it can result in significant fines and penalties for both the corporation and its executives.