Oft-mentioned Sarbanes-Oxley Act: What exactly is that?

Readers of a certain age will likely remember with clarity — and a bit of dread — the large-scale corporate scandals that engulfed companies like Enron and WorldCom a near-generation ago (point of fact: Hilder & Associates, P.C., represented the whistleblower that revealed the shocking accounting fraud that brought about Enron’s collapse).

Understandably, corporate malfeasance on such a colossal scale yielded major concern across the country and ultimately brought about significant legislative reform on Capitol Hill that resulted in the so-called Sarbanes-Oxley Act.

That law, enacted in 2002, established accounting rules and related requirements relevant to public companies and select private businesses (such as those seeking to become public entities).

As we note on a firm website page discussing Sarbanes-Oxley and its parameters, the Act was a direct response to corporate wrongdoing and a legislative attempt “to protect shareholders and the public from accounting fraud.”

A central thrust of Sarbanes-Oxley (hereafter SOX) is a required framework focused upon enhanced integrity in company accounting and financial reports. Under SOX, top-tier company officers are held more closely accountable than was the case prior to passage of the legislation. In fact, corporate CEOs and CFOs can go to prison for knowingly engaging in accounting-related fraud.

Unsurprisingly, SOX pertains to subject matter that is hyper-technical and complex, with compliance-related requirements that can be challenging for the most seasoned business professional.

As we note on our site, “It is critical to engage counsel who understands the inherent risk of such complicated matters,” especially when a SOX inquiry or investigation can lead to — as it often does — intense SEC scrutiny and formal regulatory action.

Our firm routinely advises corporate clients concerning SOX compliance. We welcome readers’ questions and contacts to the firm concerning this singular and challenging area of law.

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