Sarbanes-Oxley 404 Act of 2002 (Pub.L. 107-204, 116 Stat. 745, enacted July 30, 2002)
also known as the:
Public Company Accounting Reform and Investor Protection Act
(in the Senate) and ‘Corporate and Auditing Accountability and Responsibility Act’ (in the House) and commonly called Sarbanes–Oxley 404, Sarbox or SOX, is a United States federal law enacted on July 30, 2002. 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, Peregrine Systems 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.
The legislation set new or enhanced standards for all U.S. public company boards, management and public accounting firms. It does not apply to privately held companies. The act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties, and 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 Securities and Exchange Commission (SEC), led the SEC in the adoption of dozens of rules to implement the Sarbanes–Oxley 404 Act. It created a new, quasi-public agency, the Public Company Accounting Oversight Board, or PCAOB, charged with overseeing, regulating, inspecting and disciplining accounting firms in their roles as auditors of public companies. The act also covers issues such as auditor independence, corporate governance, internal control assessment, and enhanced financial disclosure.
The act was approved by the House by a vote of 423-3 and by the Senate 99-0. President George W. Bush signed it into law, stating it included “the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt.
Debate continues over the perceived benefits and costs of SOX. Supporters contend the legislation was necessary and has played a useful role in restoring public confidence in the nation’s capital markets by, among other things, strengthening corporate accounting controls. Opponents of the bill claim it has reduced America’s international competitive edge against foreign financial service providers, saying SOX has introduced an overly complex regulatory environment into U.S. financial markets.
How we can help
Under the Sarbanes-Oxley 404 section Act companies are required to file an internal control report. Section 404 does not provide specific language for the report. This publication contains three examples of reporting: (1) A sample management report that contains SEC-required elements; (2) provides language that may be used when management has identified material weaknesses; and (3) gives examples evaluating internal control deficiencies. We assist you in interpreting and preparing required documentation.
Sarbanes-Oxley 404 Act of 2002
Compiled Financial Statements Differences Between Compiled, Reviewed, and Audited Financials is the level of assurance provided by the CPA in the Auditors Report.
20-Factor Test to Determine Independent Contractor Status. Worker misclassification is a perennial issue for the Accountants and IRS.
Accountants See Trend in Late Payments when economic hard times hit in 2020. Companies felt pressure to improve working capital so they held on to cash