The SOX Act and outsourcing

The primary objective of the Sarbanes-Oxley Act is to restore investor confidence. To do so, the act requires CEOs and CFOs of listed companies to certify that the reports they periodically file with the Securities and Exchange Commission correctly portray the company’s financial condition. Section 404(a) further requires that the management assess the effectiveness of the company’s internal controls over financial reporting, and then state in its annual report to shareholders whether these controls are operating effectively. Basically, it means that the management must look closely and regularly at all the steps taken to ensure the integrity and reliability of the company’s financial accounts, and tell the public if there are material weaknesses in the design or operation of these steps, thereby hopefully avoiding Enron-like surprises.

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