The Sarbanes-Oxley Act of 2002 (SOX) is an act passed by U.S. Congress in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations. The SOX Act mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. The SOX Act was created in response to accounting malpractice in the early 2000s, when public scandals such as Enron Corporation, Tyco International plc, and WorldCom shook investor confidence in financial statements and demanded an overhaul of regulatory standards.
Objective – To prevent accounting errors and fraudulent practices i the enterprise and improve accuracy of corporate disclosures. This not only includes the finance department but IT as well, since it stores confidential electronic records.
The United States security and Exchange commission (SEC) administers the SOX.
For electronics records there are three rules:
First Rule – Deals with penalties related to destruction, alteration or falsification of electronic records.
Second Rule – Deals with deciding retention period for storing records.
Third Rule – Deals with the type of records that are to be stored.
An Example of SOX Implementation:
Many companies have been created to help other organizations comply with the SOX Act. Workiva Inc., for example, is one such company, providing a cloud-based productivity platform that links data and builds internal controls across global enterprises. On June 7th, 2016, Integrated DNA Technologies, Inc. announced that it was using Workiva’s Wdesk platform to help it comply with the SOX Act.
While Integrated DNA Technologies is a private company and is not required by law to adhere to the SOX Act, the company said that it wanted to comply and build internal controls in order to provide transparency for its board of directors and internal auditors.Share This: