Summary of the Provisions of the Sarbanes-Oxley Act of 2002
Many cooperative board members have expressed concern over the implications of Sarbanes-Oxley act for cooperatives. To help clarify Sarbanes-Oxley and its implications we have summarized a basic outline of some of the most important provisions of the Act. This summary is simply informative and not intended to be used as legal advice. These provisions do not directly affect cooperative boards, but should be used as a guide for best practices.
Sarbanes-Oxley Act (SOX) was designed to restore investor confidence following the outbreak of corporate scandals and bankruptcies around 2000. Currently SOX is only applicable to publicly traded companies under jurisdiction of SEC, but some states are pushing for application to large non-profit organizations.
Sarbanes-Oxley Act called for the creation of the Public Company Accounting Oversights Board. This board will register and regulate all public accounting firms, including: inspections of accounting firms, investigations and disciplinary proceedings, and enforce compliance with professional standards.
Section 3: Commission Rules and Enforcement.
A violation of Rules of the Public Company Accounting Oversight Board (“Board”) is treated as a violation of the ’34 Act, giving rise to the same penalties that may be imposed for violations of that Act.