The United States Congress approved the Sarbanes-Oxley Act in 2002 and initiated rules to safeguard the public from deceitful or wrong practices by corporations and other business entities. The main objective of the law is to improve limpidity in the financial reporting by corporations and to require a pompous system of checks and balances in each corporation.
Who must comply with SOX 404 compliance?
SOX 404 is applicable to all publicly traded firms in the US alongside wholly-owned subsidiaries and foreign firms that are publicly traded and conduct business in the US. SOX also controls accounting companies that audit companies that must comply with the Sarbanes-Oxley Act.
Charities, private firms, and non-profit organizations are usually not needed to comply with all of SOX. Private corporations should not intentionally destroy or misrepresent financial data, and SOX does have language to penalize those firms that do. Private firms that are planning an IPO must prepare to comply with SOX prior to going public.
Benefits of SOX 404 compliance:
SOX gives the framework that firms are required to follow to be better wardens of their financial data, which in result improves several other aspects of the organization.
SOX compliant organizations report that their financials are more liable, which makes stockholders contended. Firms also report that they’ve easier access to capital markets because of their enhanced financial reporting.
By being SOX compliant, firms are safer from cyberattack and the costly, humiliating consequence of data breach. Data infringements are costly to tackle & clean up, and firms might never recuperate the damage to their brand.
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