Chapter 4
How Sarbanes and Oxley
Changed Our Lives
In This Chapter
A brief history of SOX
The IT component of SOX
The costs and benefits of SOX compliance
International SOX-like regulations
S
arbanes-Oxley, otherwise known as SOX, is a law passed in 2002 that is
changing the way companies and their senior executives behave. Some
say it is the most important securities law since the 1930s, when legislation
was enacted after the Depression and the subsequent banking crisis. SOX
was passed in response to the corporate and financial scandals of the
early 2000s, when companies such as Enron and WorldCom covered up
or misrepresented a variety of questionable transactions, resulting in a
crisis in investor confidence and huge losses to their shareholders. The
US government responded quickly, passing the Sarbanes Oxley Act, which
holds up a mirror to the way corporations do business. Spawned from scan-
dal, SOX is an attempt to find the moral compass that businesses lost in the
2000s.In 2000, 2001, and 2002, the stock market finished lower than the year before
for three years in a row: a feat that hadn’t occurred since the 1930s. When
you consider the snowballing effect of company scandals, the loss of billions
of investor dollars, and a huge decline in investor trust, it was clear that
something needed to happen. The Public Company Accounting Reform and
Investor Protection Act of 2002, or SOX, is that something. In this chapter, we
look at the events that led to the creation of SOX and the ramifications the
law has for your business.