The Sarbanes-Oxley 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 of 2002 and commonly called Sarbanes-Oxley, Sarbox or SOX, is a United States
federal law enacted on July 30, 2002, as a reaction to a number of major corporate and
accounting scandals including those affecting Enron, Tyco International, Adelphia,
Peregrine Systems and WorldCom” (Wikipedia, 2009).
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.
Sarbanes-Oxley Act has 45 summary provisions and three titles, however, one
that is most key and must be followed is:
Section 101: Establishment; Duties of the Board.
“Section 103: Auditing, Quality Control, and Independence Standards and Rules.
The Board shall:
(1) register public accounting firms;
(2) establish, or adopt, by rule, "auditing, quality control, ethics, independence, and other
standards relating to the preparation of audit reports for issuers;"
(3) conduct inspections of accounting firms;
(4) conduct investigations and disciplinary proceedings, and impose appropriate
(5) perform such other duties or functions as necessary or appropriate;
(6) enforce compliance with the Act, the rules of the Board, professional standards, and
the securities laws relating to the preparation and issuance of audit reports and the
obligations and liabilities of accountants with respect thereto;
(7) set the budget and manage the operations of the Board and the staff of the Board”