Quick Definition

The Sarbanes-Oxley Act of 2002 (SOX) is a U.S. federal law that established sweeping auditing and financial regulations for public companies to protect investors from fraudulent financial reporting.

Examples

• 1A company must now have an independent audit committee as part of its board, which enhances oversight of the financial reporting process.
• 2Public companies are required to establish internal controls and procedures for financial reporting to reduce the possibility of corporate fraud.
• 3CEOs and CFOs must now personally certify the accuracy of financial information, which holds them accountable for any misconduct.
• 4Periodic financial disclosures are required to be more frequent and detailed, improving transparency for investors.

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