The Sarbanes-Oxley Act of 2002, also known as the Public Company Accounting Reform and Investor Protection Act, was enacted in response to a number of major corporate and accounting scandals. All publicly traded companies are required to comply with SOX, and a number of the Act’s provisions apply to privately held companies.
There are severe penalties for non-compliance with SOX. CEOs or CFOs of companies found non-compliant with SOX face up to 10 years in prison and a $1 million fine. Penalties differ depending upon the section violation and, besides incarceration and fines, may also lead to firings, public censure, stock devaluation, and bankruptcy.