Sarbanes – Oxley Act of

2002
 What is Sarbanes – Oxley Act of 2002?
• Passed on July 30, 2002
• Named after its creator – Senator Paul Sarbanes and
Representative Michael Oxley
• also known as the Corporate Responsibility Act, is legislation
aimed at improving financial activities and financial reporting.
• SOX requires public companies registered with the SEC and
their auditors to annually assess and report on the design and
effectiveness of internal control over financial reporting.

• Established the Public Company Accounting Oversight

Board (PCAOB) to provide independent oversight of public
accounting firms.

• PCAOB Auditing Standard No. 5 (AS 5) encourages

auditors to use a risk-based, top-down approach to identify the
key controls.
 Key takeaways:
• is a strong deterrent to unethical behavior;
• forbids corporations from making personal loans to executives;
• requires CEOs of companies to personally vouch for the accuracy and
completeness of its financial statements;
• requires public companies to hire independent, new auditors to review
internal controls;
• requires management to implement and assess internal controls;
• has created a lot of work for accountants and information systems auditors.