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Congress passed the Sarbanes-Oxley Act (SOX) to
protect investors by improving the accuracy and reliability of corporate
disclosures made pursuant to the securities laws, and for other
purposes. The Act established a board of oversight within the Securities
and Exchange Commission (SEC) that is responsible for establishing
auditing and quality control standards for all public accounting
firms and the public companies they serve.
The board will establish, or adopt, by rule, "auditing,
quality control, ethics, independence, and other standards relating
to the preparation of audit reports for issuers. In particular,
SOX provides for oversight of the audit process and creates a standard
set of criteria that all publicly held corporations must follow.
Compliance with SOX mandates that publicly traded
companies incorporate appropriate security monitoring over IT processes
to assure the accuracy of financial reporting. According to the
IT Governance Institute, the "Sarbanes-Oxley Act of 2002 ushers
in a new era of corporate governance and accountability. The need
to link sound corporate governance with effective internal control
has never been greater. As a result, the vital role information
technology plays in internal control has never been more visible
or important and is critical to the financial reporting process.
Section 404 not only requires companies to establish and maintain
an adequate internal control structure, but also to assess its effectiveness
on an annual basis."
Both domestic and European publicly-traded companies
must comply with Sarbanes-Oxley. For example, if a European company
has a listing in the U.S. or makes registered securities offerings
in the U.S., the chances are that the US Sarbanes-Oxley Act of 2002
will impact on its operations.
In addition, in 2003 a joint policy statement was
issued by the Office of the Comptroller of the Currency (OCC), the
Federal Reserve Board (FRB), and the Office of Thrift Supervision
(OTS) that notified all insured depository institutions with assets
of $500 million or more, that they must comply with SOX - whether
or not they are registered with the board established by SOX.
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