• Proper financial reports are key to SOX compliance.business accounts image by Nicemonkey from Fotolia.com
  
  The government enacted the Sarbanes-Oxley Act (SOX) in 2002 as a response to a wave of corporate misconduct in the area of accounting reports. The United States Securities and Exchange Commission (SEC) regulates SOX law. SOX laws revolve around truthful and prompt financial reports. These laws promote corporate responsibility and enhanced and timely disclosure. Failure to comply with SOX laws leads to serious legal consequences.
  
  

Benefits of Rotating Auditing Committees

• The SOX mandated the creation of SEC-regulated auditing committees. These accounting boards have the power to oversee, register, investigate and discipline public companies on the basis of their accounting records. Auditors must act independently from the organizations they oversee and corporations must change their auditing committee at least once every five years. These committees ensure that corporations honestly report finances, which protects the public from the consequences of fraudulent accounting. Rotating committees on a regular basis keeps corporations from getting to friendly with any one group of auditors, which could result in that committee showing favoritism. Conversely, rotating is beneficial because corporations could complain that their auditing committee treats them unfairly.
  
  

Benefits of Enhanced Disclosure

• The SOX requires corporations to issue detailed annual reports that includes the company's financial reports and internal controls. These details are of interest to investors and banks that may wish to finance corporations. Investors and creditors have the right to base their decisions on truthfully-detailed financial reports.
  
  

Benefits of Real-Time Disclosure

• The SOX requires that corporations issue important or urgent financial information to the public on a timely basis. These reports must be accurate and in written terms that the general public can easily understand. Knowledge of pressing information, such as possible corporate bankruptcy or division failure, is vital to stock brokers, stock holders and corporate creditors. All these groups base their financial future off of the projected security of corporations.