Definition and Overview: Sarbanes-Oxley Act (SOX)

Article

Definition and Overview: Sarbanes-Oxley Act (SOX)

Whatis.com
The Sarbanes-Oxley Act of 2002 (often shortened to SOX) is legislation enacted in response to the high-profile Enron and WorldCom financial scandals to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise. The act is administered by the Securities and Exchange Commission (SEC), which sets deadlines for compliance and publishes rules on requirements. Sarbanes-Oxley is not a set of business practices and does not specify how a business should store records; rather, it defines which records are to be stored and for how long. The legislation not only affects the financial side of corporations, but also affects the IT departments whose job it is to store a corporation's electronic records. The Sarbanes-Oxley Act states that all business records, including electronic records and electronic messages, must be saved for "not less than five years." The consequences for non-compliance are fines, imprisonment, or both. IT departments are increasingly faced with the challenge of creating and maintaining a corporate records archive in a cost-effective fashion that satisfies the requirements put forth by the legislation.

The following sections of Sarbanes-Oxley contain the three rules that affect the management of electronic records. The first rule deals with destruction, alteration, or falsification of records.

    Requires Free Membership to View

    Login

    When you register, you will start receiving targeted emails from my award-winning team of editorial writers. Our goal is to keep you informed on the hottest topics and biggest challenges faced by SAP professionals today.

    Hannah Smalltree, Editorial Director

    By submitting your registration information to SearchSAP.com you agree to receive email communications from TechTarget and TechTarget partners. We encourage you to read our Privacy Policy which contains important disclosures about how we collect and use your registration and other information. If you reside outside of the United States, by submitting this registration information you consent to having your personal data transferred to and processed in the United States. Your use of SearchSAP.com is governed by our Terms of Use. You may contact us at webmaster@TechTarget.com.

Sec. 802(a) "Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both."

The second rule defines the retention period for records storage. Best practices indicate that corporations securely store all business records using the same guidelines set for public accountants.

Sec. 802(a)(1) "Any accountant who conducts an audit of an issuer of securities to which section 10A(a) of the Securities Exchange Act of 1934 (15 U.S.C 78j-1(a)) applies, shall maintain all audit or review workpapers for a period of 5 years from the end of the fiscal period in which the audit or review was concluded."

This third rule refers to the type of business records that need to be stored, including all business records and communications, including electronic communications.

Sec. 802(a)(2) "The Securities and Exchange Commission shall promulgate, within 180 days, such rules and regulations, as are reasonably necessary, relating to the retention of relevant records such as workpapers, documents that form the basis of an audit or review, memoranda, correspondence, communications, other documents, and records (including electronic records) which are created, sent, or received in connection with an audit or review and contain conclusions, opinions, analyses, or financial data relating to such an audit or review."
Related Topics: SAP and GRC, VIEW ALL TOPICS

Join the conversationComment

Share
Comments

    Results

    Contribute to the conversation

    All fields are required. Comments will appear at the bottom of the article.
    Back to top