The Sarbanes–Oxley Act of 2002 (“the Act”) is a federal law that is intended to protect investors from fraudulent accounting activities by corporations. The Act was created in response to several highly-publicized accounting scandals in the early 2000s that negatively affected investor confidence. Below is an overview of the Act’s major components.
- Public Company Accounting Oversight Board: Title I establishes the Public Company Accounting Oversight Board, which provides oversight of public accounting firms that provide audit services. This section also addresses auditor registration, compliance audit criteria, quality control inspections, and compliance enforcement.
- Auditor Independence: Title II establishes standards for external auditor independence. It also addresses issues such as audit partner rotation, new auditor approval requirements, and auditor reporting requirements.
- Corporate Responsibility: Title III requires senior corporate executives to take personal responsibility for the completeness and accuracy of corporate financial reports. It also addresses issues such as interactions between corporate audit committees and external auditors, corporate officer behavior limits, and penalties for non-compliance.
- Enhanced Financial Disclosures: Title IV details reporting requirements for financial transactions and requires internal controls to assure the accuracy of financial reports. It also requires the reporting of changes to organizational financial status and enhanced reviews by the Securities and Exchange Commission.
- Analyst Conflicts of Interest: Title V defines the conduct guidelines for securities analysts and requires the disclosure of conflicts of interest.
- Commission Resources and Authority: Title VI outlines the conditions under which an individual can be barred from practicing as an advisor, broker, or dealer.
- Studies and Reports: Title VII requires the performance of various studies and reports detailing securities violations, enforcement actions, the role of credit rating agencies in the operation of securities markets, and the effects of consolidation of public accounting firms.
- Corporate and Criminal Fraud Accountability: Title VIII details criminal penalties for the destruction, manipulation, or alteration of financial records. This section also provides protections for whistleblowers.
- White Collar Crime Penalty Enhancement: Title IX increases the penalties associated with conspiracies and various types of white-collar crime.
- Corporate Tax Returns: Title X requires the signature of an organization’s chief executive officer on its tax return.
- Corporate Fraud Accountability: Title XI identifies records tampering and corporate fraud as criminal offenses and connects them to specific penalties.
Texas Corporate Disinformation Attorneys
Corporate disinformation involves the dissemination of misleading information or the concealment of potentially damaging information by a corporation. This includes information pertaining to financial statements, accounting reports, earnings statistics, insurance estimates, competitor pricing, diagnostic reviews, and press releases. By failing to adhere to state and federal disclosure laws or misleading the public, entities face the risk of disinformation litigation. Ajamie LLP works with clients to ensure they fulfill their disclosure obligations. We have a proven track record of defending and pursuing corporate disinformation claims. Please contact us for a consultation.