Question

What type of business does the Sarbanes Oxley act affects more. Please give a detailed explanation.

Answer 1

The Sarbanes-Oxley Act of 2002 is legislation passed by the U.S. Congress to protect shareholders and the general public from accounting errors and fraudulent pratices in the enterprise as well as improve the accuracy of corporate disclosures. It was aimed at improving corporate governance and accountablility. Now, all public companies must comply with SOX.

The Sarbanes-Oxley Act not only affects the financial side of business, but also IT departments charged with storing a corporation's electronic records. The SOX Act does not set forth a set of business practices in this regard but instead defines which company records need to be stored on file and for how long. It does not specify how a business should store its records, only that the IT department is responsible for storing them, according to standard outlined in the SOX Act.

The Sarbanes-Oxley Act of 2002 affects all public companies in the United States by requiring them to follow the provision of 11 sections of the act. In addition to publicly-traded companies, along with their wholly-owned subsidiaries and foreign companies that are publicly traded and do business in the U.S.

If you operate a publicly-traded company, or an accounting firm that works for a public company, then Sarbanes has a tremendous impact on your company.

The changes in the Sarbanes-Oxley Act are perhaps even greater - and most costly - for publicly- traded companies. The companies are required to set up internal controls to ensure that financial reporting and other company governance actions do not cross any legal lines.