If you weren’t in the business world twenty years ago when the Sarbanes-Oxley (SOX) Act became law. You may not realize the impact it had on the way publicly held American companies report their financial information.
The law was passed after a number of high-profile corporate scandals involving executives who misrepresented the financial status of their companies. With the assistance of accountants, they hid liabilities and overstated assets so that investors and potential investors were kept in the dark. Enron was probably the best-known of the companies where significant wrongdoing was discovered.
What does the SOX Act require?
The SOX Act placed strict requirements on publicly held companies as well as their accountants. They’re required to have internal controls to make sure that all of their financial statements are accurate. Further, company executives must personally certify their accuracy.
The federal government also has stricter regulations for accounting firms. The SOX Act also strengthened whistleblower protections for employees who expose violations of the law in their organizations.
Violations can mean federal prison time
In addition to substantial financial penalties, those found guilty of SOX Act violations can face prison sentences. A corporate executive who “willfully” certifies a false financial statement or destroys records to interfere with an investigation could face two decades behind bars in addition to millions in fines. Accountants and auditors can face a decade behind bars if they’re found guilty of failing to maintain financial documents as required by law.
If you’ve been arrested or even if you learn that you’re under investigation for violations of the SOX Act, it’s crucial to take the matter seriously. You should get experienced legal guidance.