The Sarbanes-Oxley Act of 2002 (often shortened to SOX) is legislation passed by the U.S. Congress to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise, as well as improve the accuracy of corporate disclosures.
Summary of Section 404
Issuers are required to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures.
The registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.
The legislation sets deadlines and publishes rules on requirements of corporate disclosures, accounting practices in an effort to improve corporate governance and accountability. The act demands such things as saving all business records, including electronic records and electronic messages, and other data retention requirements. Consequences for noncompliance include fines or imprisonment, or both.