Understanding The Definition Of Sarbanes Oxley Act
Understanding the definition of Sarbanes Oxley Act could be a tall order for a lay man. But here in this article I have tried to make the definition of Sarbanes Oxley Act much simpler. So, read on.
Being a U.S. federal law, the SOX Act is also known as the Public Company Accounting Reform and Investor Protection Act of 2002. This act was mainly passed by the U.S. Congress to protect investors from the possibility of fraudulent accounting activities by corporations. In its expanded form, it reads as Sarbanes Oxley Act. Like all U.S. federal laws, this too has a dedicated section for definitions.
The section 2 of the Sarbanes Oxley Act deals with definition of terms and entities that are mentioned in the text of the Act. The section has 16 definitions. The section of definition of Sarbanes Oxley Act defines the terms in general as well as conforming amendment, which relates the Sarbanes Oxley Act of 2002 to the Securities Exchange Act of 1934.
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The major terms covered in the Sarbanes Oxley definition section include Appropriate State Regulatory Authority, bodies like Board and the rules of board, Commission, Issuer, Person associated with a public accounting firm and exemption authority. There are audit related definitions including Audit, Audit Committee, Audit Report and Non Audit Services. In order to further reduce any ambiguity the entities like Public Accounting Firm, Registered Public Accounting firm. Security, Security laws and State are also defined here. Lets briefly discuss some of the aforementioned definitions in detail as follows: The term State as per the definition of Sarbanes Oxley Act covers all the states of the United States, district of Columbia, Puerto Rico, the Virgin Islands as well as any other territory in possession of the United States. Similarly, the section of definition of Sarbanes Oxley Act informs that Appropriate State Regulatory Authority can refer to any state or other agency which licenses or regulates accounting practices. Audit is defined in the section of definition of Sarbanes Oxley Act as the procedure of examination of financial records of a company as per the rules and procedures applicable to the company. Audit Committee has also been defined in the section of definition of Sarbanes Oxley Act. Audit Committee forms any group of people established for overseeing the accounting and financial reporting processes of the issuer. The term issuer as per the definition of Sarbanes Oxley Act is defined in Section 3 of the Securities Exchange Act of 1934. This means that any company whose securities are registered as per section 12 of the Securities Exchange Act can be called an issuer for the purpose of this Act as well. The term Professional Standards is also defined in the section of definition of Sarbanes Oxley Act. This term covers accounting standards set by the Securities Act of 1933 as amended. Auditing standards are also discussed in this section. The section of definition of Sarbanes Oxley Act defines 'board' as the Public Company Accounting Oversight Board. The term Commission is defined as the Securities and Exchange Commission. The definition of Sarbanes Oxley Act has been discussed extensively and in totality, is thus regarded as the most sweeping securities legislation since the Securities and Exchange Act of 1934. |
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