What is the future of SOX? Will the Sarbanes-Oxley Act keep developing more in the future?

What is the future of SOX? Will the Sarbanes-Oxley Act keep developing more in the future?

What is the future of SOX? Will the Sarbanes-Oxley Act keep developing more in the future?

The Sarbanes-Oxley Act at 15: what has changed?

On the 15th anniversary of the Sarbanes-Oxley Act, we reflected on the positive change in the accuracy of financial reporting and quality of auditing in the US since its enactment.

n 30 July 2002, in the wake of a series of financial reporting scandals on a scale that rocked the financial markets, the Sarbanes-Oxley Act (SOX or the Act) was signed into law — following passage by an overwhelming majority in the US Senate and House of Representatives — in an effort to restore public confidence in the reliability of financial reporting.

The law set out to accomplish this daunting goal by establishing a new accountability framework for financial reporting. Perhaps the most dramatic change brought about by the law was with respect to the audit profession: by calling for the establishment of the Public Company Accounting Oversight Board (PCAOB or Board), Congress brought an end to self-regulation of the audit profession.

In addition, the law put in place a requirement for independent audit committees to oversee the financial reporting process. Thus aligning their goals with those of investors and auditors. SOX also established the requirement for corporate executives to certify the contents of financial reports and significantly increased penalties for persons participating in financial fraud, among numerous other changes. We believe that the Act has been successful — financial reporting and audit quality have improved, to the benefit of investors and other stakeholders.

Principal components of the Sarbanes-Oxley Act of 2002

1. Established independent oversight of public company audits, funded via fees paid by public companies and SEC-registered broker-dealers
  • Firstly, established the PCAOB, an independent regulator of auditors of public companies and broker-dealers
  • Secondly, provided the PCAOB with inspection, enforcement and standard-setting authority

 

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