The Sarbanes-Oxley Act of 2002

• In: Ethics Training

Thanks to the Sarbanes-Oxley Act, accurate reporting and auditing procedures have risen to a new level. Learn what SOX means for proper reporting in today’s corporations – and the harsh alternative to non-compliance, too.

The Sarbanes-Oxley Act (also known as “The Public Company Accounting Reform & Investor Protection Act” or “SOX” for short), first implemented in the summer of 2002 and named after its sponsors Senator Sarbanes and Representative Oxley, outlines strict new regulations enforcing proper accounting, auditing and reporting procedures for corporations – resulting in severe consequences if not adhered to. This United States federal law is composed of 11 titles that outline its requirements that run the gamut of accounting and reporting accuracy, compliance with external auditors, proper record-keeping practices, various penalties regarding fraud accountability, and other measures taken to ensure ethical maintenance and representation of cash flow: investments, surpluses, budgets and returns.

Sarbanes-Oxley is considered a major milestone in the era of corporate compliance and business reform, and is closely tied to infamous cases such as that of Enron, Tyco, WorldCom and Adelphia – of which contributed to its inception. It applies solely to public companies.

Components of Sarbanes-Oxley Compliance Training

In an ethics training program, Sarbanes-Oxley is an integral part of executive and board of directors ethics training. Sarbanes-Oxley compliance training typically includes the following areas of study:

• Federal Law: What is the definition of ethical recordkeeping and reporting, according to the Government?
• Ethical corporate responsibility: How must a corporation’s culture adapt to become compliant to this federal law?
• Proper accounting methods: What is the proper and most acceptable means of recording all cash flow records? For how long must these records be kept? When can they be discarded? What should be done if records are found missing?
• Auditing: What happens when we get audited? What is expected of us? What are the responsibilities and limitations of the external auditor?
• Reporting: What are an employee’s options in reporting his or her superior for fraudulent accounting or auditing practices? What system is in place to supply round-the-clock or anonymous reporting?
• Consequences as a result of a failure to comply: What consequences may befall the participants of a fraudulent practice, or the company itself? Who else may be affected? What are the rules and regulations that the company considers to be a grounds for termination?

Sarbanes-Oxley ethics and compliance training should also include a description of the main responsibilities of top executives and officers, their legal responsibilities, and the imposed fines and penalties of violations.