What is SoX Compliance?

The Sarbanes-Oxley Act (SOX) was established as a means to improve financial disclosures and to protect investors and clients from accounting errors and fraudulent practices in corporations and thus ensure that scandals like Enron or WorldCom can never happen again. The act also addresses auditor independence, corporate governance and internal control assessment.

To achieve SOX compliance, companies must undergo and pass a SOX compliance audit in which the company, its financial statements and, most importantly, its internal controls are assessed by external auditors. Not only is meeting SOX compliance requirements a legal obligation, it is also a standard for good business practice.

Who Needs SoX Compliance?

Private companies and companies that have less than $100 million in annual revenue are not required to comply with SOX. However, private companies who are planning to go public should prepare to comply with SOX before they enter the stock market.

The SOX Act applies to all companies that are publicly traded in the United States, including wholly-owned subsidiaries (i.e. companies whose common stock is 100% owned by a parent company).

SOX also covers accounting firms that are responsible for auditing businesses who are required to comply with SOX.

The Sarbanes-Oxley Act also applies to foreign companies that are publicly traded and do business in the US.