What is the SOX Act?

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The Sarbanes-Oxley Act (SOX), enacted in 2002, is a regulatory framework created to reinforce transparency and accountability in companies, especially after the major corporate scandals of the early 2000s.

But how exactly does this legislation impact operations and corporate governance? That is what we will see throughout this article.

How the SOX Act transforms corporate governance: what you need to know.

The SOX Act was developed to protect investors and the public from fraudulent practices and accounting errors, ensuring greater accuracy and transparency in financial reporting. All companies listed on American stock exchanges, including Brazilian companies such as Petrobras and Vale, must comply with their requirements.

In addition to requiring compliance with strict standards, the law imposes severe penalties for non-compliance, such as million-dollar fines and even imprisonment for those responsible for fraud.

Pillars of the SOX Act

The legislation is comprised of several sections that establish guidelines for managing and auditing financial information. Among the main highlights are:

• Section 302: Mandates senior management to review financial reports, ensuring their accuracy and revealing any deficiencies in internal controls.
• Section 404: Requires companies to publish detailed assessments of their internal controls in annual reports, and these assessments are reviewed by independent auditors.
• Section 409: Determines immediate communication of significant changes in the company's financial position.
• These and other devices were fundamental to reducing financial crimes, restoring investor confidence, and promoting ethical practices in the corporate environment.

Why is the SOX law essential for companies?

In addition to avoiding severe penalties, SOX compliance demonstrates commitment to integrity and accountability, strengthening investor confidence. Implementing strict internal controls and frequent audits not only reduces risks but also improves operational efficiency.

Companies that adopt practices aligned with SOX are better prepared to face financial crises and scandals, preserving their reputation and long-term sustainability.

How Can Vennx Help?

Managing the requirements of the SOX Act can be a challenge, especially for companies with complex structures. That's why Vennx offers specialized solutions to support the implementation of internal controls, compliance assessments, and audits.

Our team of experts is ready to help you transform compliance into a strategic differentiator, ensuring that your company is aligned with global best practices. Talk to us here.