SAP® GRC For Dummies®

Chapter 4. How Sarbanes and Oxley Changed Our Lives

Sarbanes-Oxley, otherwise known as SOX, is a law passed in 2002 that is changing the way companies and their senior executives behave. Some say it is the most important securities law since the 1930s, when legislation was enacted after the Depression and the subsequent banking crisis. SOX was passed in response to the corporate and financial scandals of the early 2000s, when companies such as Enron and WorldCom covered up or misrepresented a variety of questionable transactions, resulting in a crisis in investor confidence and huge losses to their shareholders. The US government responded quickly, passing the Sarbanes Oxley Act, which holds up a mirror to the way corporations do business. Spawned from scandal, SOX is an attempt to find the moral compass that businesses lost in the 2000s.

In 2000, 2001, and 2002, the stock market finished lower than the year before for three years in a row: a feat that hadn't occurred since the 1930s. When you consider the snowballing effect of company scandals, the loss of billions of investor dollars, and a huge decline in investor trust, it was clear that something needed to happen. The Public Company Accounting Reform and Investor Protection Act of 2002, or SOX, is that something. In this chapter, we look at the events that led to the creation of SOX and the ramifications the law has for your business.

Figuring Out Whether SOX Applies to You

SOX applies to you if you are:

• A publicly traded company, ...