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Enterprise Risk Management Best Practices: From Assessment to Ongoing Compliance by Anne M. Marchetti

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CHAPTER SEVEN

Ongoing Compliance Overview

ORIGIN OF THE SARBANES-OXLEY ACT

A handful of companies have become household names mostly because of their demonstration of corporate greed, fraud, and accounting improprieties. The activities of these few organizations are not representative of the majority of companies in the United States, yet the result of their abuses has left a significant mark on public corporations. Considered the most significant legislation to impact the accounting profession since the Securities Acts of 1933 and 1934, the Sarbanes-Oxley Act of 2002 (SOX) is comprised of 11 titles that outline complex compliance requirements affecting a public company’s entire organization, including its relationship with its external auditor.

SOX was signed into law to improve the accuracy and transparency of financial reporting and corporate disclosures as well as to reinforce the importance of corporate ethical standards. In turn, it has placed significant responsibility on issuers to design, implement, and maintain effective systems of internal controls to ensure adequate financial reporting to the Securities and Exchange Commission (SEC) and investors. In addition, SOX imposes significant criminal penalties and fines on corporate executives who do not comply. Ultimately, the requirements of SOX seek to enhance the quality, accuracy, and timeliness of financial data to allow shareholders to make informed decisions regarding their investments.

GENERATING VALUE FROM COMPLIANCE ...

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