The Sarbanes-Oxley Act (“SOX”) sets forth accounting rules and required disclosures for publicly traded domestic and foreign companies doing business in the United States and private companies preparing to become public.
SOX compliance requires applicable companies to establish an accounting framework that produces financial reports that rely on verifiable data. The data cannot be revised without documenting the change, the person who made it, the reason, and the date. Additionally, SOX requires companies to disclose material changes to their financial conditions and operations in an easily understandable format. Finally, companies must keep and maintain business records for five years. The CEO and CFO are responsible for the accuracy of each financial report submitted to the Securities and Exchange Commission (“SEC”) and can be held criminally liable under SOX for making false or inaccurate reports.
It is vital to have competent legal counsel when charged with SOX violations or even if under investigation for SOX violations.