The Sarbanes-Oxley Act of 2002 (SOX) introduced significant changes to financial practice and corporate management regulation. Passed in the wake of numerous corporate scandals, SOX is a complex piece of legislation that requires companies to make major changes to bring their organizations into compliance. The act holds top executives personally responsible for the accuracy and timeliness of their company’s financial data — under threat of criminal prosecution. Thus, SOX compliance has become a top priority for publicly traded companies.
The act also sets deadlines for compliance, all of which will take effect during the next two years. Of the sections already in effect, the most publicized has been Section 302, implemented in August 2002, which requires CEOs and CFOs to personally certify quarterly and annual financial statements. The first indictment of a CEO for failure to comply with the act occurred in 2003. This is just the tip of the iceberg — violating SOX can bring fines up to $5 million or 20 years in prison.
Smart companies recognize that Sarbanes-Oxley presents an opportunity to improve information management and increase efficiency.
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