| Sarbanes Oxley Law, more commonly known as | | | | shareholders and other concerned parties. |
| SOX, is a popular legal tool to ensure that the | | | | Therefore, as mandated by the sections of the |
| right measures of corporate governance are | | | | act, companies have to be more transparent in |
| infused in the business operations to avoid any | | | | their functioning at both micro and macro levels. |
| corporate scams or misreporting. In fact, the area | | | | SOX place the responsibility on the owner of the |
| governed by this act is much larger and diverse, | | | | vehicle and not the driver. All important |
| yet the eventual aim is to curtail any illegal activity | | | | certifications and disclosures are mandated to be |
| in the business sphere by tightening the grip of | | | | made by the principal officers concerned. The |
| law on the overall operations, especially the | | | | implied penalties and subsequent enforcement |
| financial proceedings. | | | | actions are most strongly felt by the company |
| The Requirements: | | | | leaders. You can no longer escape the charges by |
| The requirements of the act regarding the | | | | firing a junior executive. |
| implementation of strong internal controls are | | | | The scope of the coverage extends beyond the |
| simple and straightforward. Evaluating their | | | | physical United States borders. It regulates the |
| strength and weaknesses, through regular | | | | overseas operations of companies publicly traded |
| disclosures, prevents frauds and scams from due | | | | on the U.S. exchanges. |
| to misrepresentation or misreporting. To sum up, | | | | The act is further known for its tight deadlines |
| "corporate transparency" is the key mantra. | | | | and effective penalty and enforcement |
| About The Act: | | | | implications. |
| Different sections cater to different areas and | | | | Considering the sharp increase of financial scams |
| functionalities of an organization--all ultimately | | | | and their intractability, SOX aims to keep a track |
| aimed at restricting the potential illegal activities. | | | | of the company's internal functioning patterns and |
| For example, several sections, like 302, 404, and | | | | information disclosure guidelines. Keeping the same |
| 409, deal with the information technology aspect. | | | | in mind, the law mandates the highest officials |
| SOX put a lot of emphasis on the company's | | | | including CEOs to certify the information made |
| disclosure policies. It has been observed that the | | | | public. |
| biggest scandals have been energized by the | | | | Though legally binding only for public companies, if |
| company's tendency to hide information or | | | | could positively impact private companies' overall |
| present partial information to disorient the | | | | functioning and operational capabilities. |