The Sarbanes Oxley Act of 2002 (107 H.R. 3763), signed into law on 30
July 2002, is considered the most significant change to federal
securities laws in the United States since the New Deal. It came in the
wake of a series of corporate financial scandals, including those
affecting Enron, Arthur Andersen, and WorldCom. The law is named after
Senator Paul Sarbanes and Representative Michael G. Oxley. It was
approved by the House by a vote of 423-3 and by the Senate 99-0.
Its major provisions include:
Certification of financial reports by CEOs and CFOs
Ban on personal loans to Executive Officers and Directors
Accelerated reporting of trades by insiders
Prohibition on insider trades during pension fund blackout periods
Public reporting of CEO and CFO compensation and profits
Additional disclosure
Auditor independence, including outright bans on certain types of work
and pre-certification by the company's Audit Committee of all other
non-audit work Criminal and civil penalties for securities violations
US companies are now obliged to have an internal audit function, which will need to be certified by external auditors.
Significantly longer jail sentences and larger fines for corporate
executives who knowingly and willfully misstate financial statements. Prohibition on audit firms providing extra
"value-added" services to their clients including actuarial services,
legal and extra services (such as consulting) unrelated to their audit
work. A requirement that publicly traded companies furnish
independent annual audit reports on the existence and condition (i.e.
reliability) of internal controls as they relate to financial
reporting
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Corporate and Securites Law