Definition of Sarbanes Oxley

Sarbanes Oxley is the common name of the Public Company Accounting Reform and Investor Protection Act of 2002, which was enacted into federal law in July of 2002. The bill was passed in reaction to the Enron, Tyco, Adelphia and WorldCom accounting scandals, which caused billions in investor losses. Commonly referred to as SOX, Sarbanes Oxley has brought about large changes in the accounting and data management methods used in publicly traded companies.

Name Origin

The Sarbanes Oxley bill is named for its sponsors, U.S. Senator Paul Sarbanes of Maryland and U.S. Representative Michael Oxley of Ohio.

Act Number

The official congressional number of the Sarbanes Oxley Act is Pub. L. 107-204, 116 Statute 745. It contains 11 sections.

Votes

The Sarbanes Oxley bill was approved by a 334 to 90 vote margin in the U.S. House of Representative and by a 99 to 0 vote in the U.S. Senate.

Application

The act applies only to U.S. public companies and does not pertain to privately held companies.

Regulations

New regulations include criminal penalties for corporate boards and company executives regarding accounting accuracy and honesty. Sarbanes Oxley also calls for enhanced data security in computer systems and financial records.

Implementation

Implementing Sarbanes Oxley required the U.S. Securities and Exchange Commission to enact additional rules that, in turn, required publicly traded companies to change accounting, auditing and internal controls.