Sarbanes-Oxley Act Key Terms

Some key terms for understanding Sarbanes-Oxley Act requirements

The Sarbanes-Oxley act, otherwise known as SOX, came from the federal government in 2002, in the wake of some pretty heavy financial scandals. There are many provisions in SOX, such as reporting requirements, record policies and much more, in order to make sure that corporations are responsible in keeping with their impacts on markets, investors, stock holders and the general public. Knowing about some of the main key terms on SOX can help businesses navigate this world of protocol and be compliant, as well as expect the same of others.

Corporate responsibilities

This general component of the Sarbanes-Oxley legislation refers to all of the things a company, especially a publicly traded one, must do in order to be SOX compliant.

Whistleblower policy

One thing a company needs to do under Sarbanes-Oxley is provide a whistleblower policy, or a way to protect those who come forward with information that may be damaging to the company but necessary for compliance or legality.

Document retention

Another element of complying with Sarbanes-Oxley is in document retention. A lot of "corporate dodges" rely on "lost" or missing paperwork. For this reason, document retention policies get noticed by auditors.

Internal controls

Another aspect of SOX is looking at how financial reporting gets done within any company or organization. There are all kinds of rules and standards for setting up "checks and balances" or other prudent kinds of protocols for making sure reporting is happening the right way.
Indiana University.

IT Audit

A lot of the work being done around Sarbanes-Oxley focuses on the ways data is managed electronically. An IT audit, or examination of the work and systems within the Information Technology department, would address this significant chunk of corporate responsibility.

Real-time disclosures

Yet another aspect of SOX that applies to publicly traded companies is the issue of reporting to the public, or the investor. The ways that financials are disclosed have a strong impact on how investments are made, and one of the gates that SOX is meant to close is the kind of bad reporting that has allowed corporate executives to manipulate stock holders in the past; it allows for timely information on which the stock holders can rely.

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