Regional-focused Compliance - Governance, Risk, and Compliance Topic for Oracle Applications - page 399

The Sarbanes-Oxley Act of 2002 (USA)
The Sarbanes-Oxley Act of 2002, enacted July 30, 2002, also known as Sarbox or SOX,
is a United States federal law enacted on July 30, 2002, which set new or enhanced
standards for all U.S. public company boards, management, and public accounting
firms. It is named after sponsors U.S. Senator Paul Sarbanes (D-MD) and U.S.
Representative Michael G. Oxley (R-OH).
The bill was enacted as a reaction to a number of major corporate and accounting
scandals including those affecting Enron, Tyco International, Adelphia, and
WorldCom. These scandals, which cost investors billions of dollars when the share
prices of affected companies collapsed, shook public confidence in the nation's
securities markets.
It does not apply to privately held companies. The act contains 11 titles or sections,
ranging from additional corporate board responsibilities to criminal penalties. It
requires the Securities and Exchange Commission (SEC) to implement rulings on
requirements to comply with the new law. Harvey Pitt, the 26th chairman of the SEC,
led the SEC in the adoption of dozens of rules to implement the Sarbanes-Oxley Act.
It created a new, quasi-public agency, the Public Company Accounting Oversight
Board (PCAOB) charged with overseeing, regulating, inspecting, and disciplining
accounting firms in their roles as auditors of public companies. The act contains 11
titles that describe specific mandates and requirements for financial reporting. Each
title consists of several sections, which are summarized as follows:
Public Company Accounting Oversight Board
(PCAOB)
Title I consists of nine sections and establishes the Public Company Accounting
Oversight Board, to provide independent oversight of public accounting firms
providing audit services (auditors). It also creates a central oversight board
tasked with registering auditors, defining the specific processes and procedures
for compliance audits, inspecting and policing conduct and quality control, and
enforcing compliance with the specific mandates of SOX.
Auditor Independence
Title II consists of nine sections and establishes standards for external auditor
independence, to limit conflicts of interest. It also addresses new auditor approval
requirements, audit partner rotation, and auditor reporting requirements. It restricts
auditing companies from providing non-audit services (for example, consulting) for
the same clients.