SOX

The Sarbanes-Oxley Act (SOX), enacted in 2002, aims to enhance the accuracy and reliability of corporate disclosures to protect investors.

Consequences of Non-Compliance with SOX:

Significant penalties

Potential damage to reputation

SOX Governing Bodies:

The Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) oversee compliance, focusing on upholding high standards of financial transparency and accountability.

**Key Internal Control Standards under SOX:

**Section 302: Requires the company’s principal executive and financial officers to certify the accuracy of financial reports annually and quarterly.

Section 404: Known as the most costly aspect for many businesses, this section mandates management to maintain robust internal controls over financial reporting, ensuring accountability, resource protection, fraud prevention, and regulatory compliance.

Documentation and Maintenance:

SOX requires detailed documentation of internal controls which should comprehensively cover the initiation, processing, recording, and reporting of transactions. 

Effective documentation can include flowcharts, written policies, and descriptions, ensuring a clear audit trail from the origin of the document to its final control. Regular reviews of financial statements, journal entries, spreadsheets, and invoices are crucial to verifying their authenticity and integrity.