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Wednesday, February 10, 2010

Major Provisions of SOX

The Sarbanes-Oxley Act's major provisions include the following:
 Creation of the Public Company Accounting Oversight Board (PCAOB);
 A requirement that public companies evaluate and disclose the effectiveness of their internal controls as they relate to financial reporting, and that independent auditors for such companies "attest" (i.e., agree, or qualify) to such disclosure;
 Certification of financial reports by chief executive officers and chief financial officers;
 Auditor independence, including outright bans on certain types of work for audit clients and pre-certification by the company's audit committee of all other non-audit work;
 A requirement that companies listed on stock exchanges have fully independent audit committees that oversee the relationship between the company and its auditor;
 Ban on most personal loans to any executive officer or director;
 Accelerated reporting of insider trading;
 Prohibition on insider trades during pension fund blackout periods;
 Additional disclosure;
 Enhanced criminal and civil penalties for violations of securities law;
 Significantly longer maximum jail sentences and larger fines for corporate executives who knowingly and willfully misstate financial statements, although maximum sentences are largely irrelevant because judges generally follow the Federal Sentencing Guidelines in setting actual sentences

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