The Sarbanes-Oxley Act of 2002 is a law the U.S. Congress passed on July 30 of that year to help protect investors from fraudulent financial reporting by corporations. Also known as the SOX Act of 2002, it mandated strict reforms to existing securities regulations and imposed tough new penalties on lawbreakers. Show The Sarbanes-Oxley Act of 2002 came in response to financial scandals in the early 2000s involving publicly traded companies such as Enron Corporation, Tyco International plc, and WorldCom. The high-profile frauds shook investor confidence in the trustworthiness of corporate financial statements and led many to demand an overhaul of decades-old regulatory standards.
The act took its name from its two sponsors—Sen. Paul S. Sarbanes (D-Md.) and Rep. Michael G. Oxley (R-Ohio). The rules and enforcement policies outlined in the Sarbanes-Oxley Act of 2002 amended or supplemented existing laws dealing with security regulation, including the Securities Exchange Act of 1934 and other laws enforced by the Securities and Exchange Commission (SEC). The new law set out reforms and additions in four principal areas:
The Sarbanes-Oxley Act of 2002 is a complex and lengthy piece of legislation. Three of its key provisions are commonly referred to by their section numbers: Section 302, Section 404, and Section 802.
Because of the Sarbanes-Oxley Act of 2002, corporate officers who knowingly certify false financial statements can go to prison. Section 302 of the SOX Act of 2002 mandates that senior corporate officers personally certify in writing that the company's financial statements comply with SEC disclosure requirements and "fairly present in all material respects the financial condition and results of operations of the issuer" at the time of the financial report. Officers who sign off on financial statements that they know to be inaccurate are subject to criminal penalties, including prison terms. Section 404 of the SOX Act of 2002 requires that management and auditors establish internal controls and reporting methods to ensure the adequacy of those controls. Some critics of the law have complained that the requirements in Section 404 can have a negative impact on publicly traded companies because it's often expensive to establish and maintain the necessary internal controls. Section 802 of the SOX Act of 2002 contains the three rules that affect recordkeeping. The first deals with destruction and falsification of records. The second strictly defines the retention period for storing records. The third rule outlines the specific business records that companies need to store, which includes electronic communications. Besides the financial side of a business, such as audits, accuracy, and controls, the SOX Act of 2002 also outlines requirements for information technology (IT) departments regarding electronic records. The act does not specify a set of business practices in this regard but instead defines which company records need to be kept on file and for how long. The standards outlined in the SOX Act of 2002 do not specify how a business should store its records, just that it's the company IT department's responsibility to store them.
The Sarbanes-Oxley Act of 2002 (SOX) is a US federal law administered by the Securities and Exchange Commission (SEC). Among other things, SOX requires publicly traded companies to have proper internal control structures in place to validate that their financial statements reflect their financial results accurately. SOX is heavily influenced by customer’s internal processes especially when it comes to controls for financial reporting. For example, SOX requirements involve internal customer controls for the preparation and review of financial statements, and especially controls that affect accuracy, completeness, effectiveness, and public disclosure of material changes related to financial reporting. The SEC doesn't define or impose a SOX certification process. Instead, it provides broad guidelines for publicly traded companies to determine how to comply with SOX reporting requirements. Microsoft and SOXMicrosoft cloud services customers subject to compliance with the Sarbanes-Oxley Act (SOX) can use the SOC 1 Type 2 attestation that Microsoft received from an independent auditing firm when addressing their own SOX compliance obligations. This attestation is appropriate for reporting on internal controls over financial reporting. Even though there's no SOX certification or validation for cloud service providers, Microsoft can help customers meet their SOX obligations. For example, SOX requires internal controls for the preparation and review of financial statements, especially controls that affect the accuracy, completeness, effectiveness, and public disclosure of material changes related to financial reporting. To help companies, Microsoft maintains a SOC 1 Type 2 attestation appropriate for reporting on such controls across a broad portfolio of services that can be used to build a wide range of applications. It's based on the American Institute of Certified Public Accountants (AICPA) Statement on Standards for Attestation Engagements 18 (SSAE 18) and the International Standard on Assurance Engagements No. 3402 (ISAE 3402). (This attestation replaced SAS 70.) The audit report, produced by a third-party auditing firm, attests that Microsoft controls were designed appropriately, in operation on a specified date, and operating effectively over a specified time period. Customers can review the reports to learn about Microsoft control objectives and the effectiveness of its controls, and get access to complementary controls. At Microsoft, we share the responsibility of compliance with our customers. We supply the specifics about our compliance programs, which you can verify by requesting detailed audit results from the certifying third parties. Ultimately, however, it's up to you to determine whether our services comply with the specific laws and regulations applicable to your business. For example, there are SOX-related security controls, such as user access to cloud resources, that are your responsibility: your organization must develop appropriate auditing of these controls as part of your SOX compliance. Microsoft in-scope cloud platforms & services
Azure, Dynamics 365, and SOXAs cloud adoption gains momentum, more and more customers are exploring how to migrate applications and workloads subject to SOX compliance obligations to the cloud. Even though there's no SOX certification or validation for cloud service providers, Azure can help you meet your SOX obligations. If you're subject to SOX compliance obligations, you should review the Azure SOC 1 Type 2 attestation, which is performed according to:
The AICPA SSAE 18 standard replaced SAS 70, and it's appropriate for reporting on controls at a service organization relevant to user entities internal controls over financial reporting. This is the formal audit that you can rely on for third-party reviews of technology service providers when pursuing your own industry specific compliance obligations for assets deployed on Azure. It includes auditor's opinion on control effectiveness to achieve the related control objectives during the specified monitoring period. Moreover, Azure has produced guidance documentation to help you use Azure's existing compliance reports when addressing your own SOX compliance obligations. It draws on internal Microsoft experience with migrating SOX relevant applications to Azure. Moreover, this guidance provides migration best practices, including SOX compliance implications, reviews of two publicly available case studies, and lessons learned from Microsoft's internal migration projects. Office 365 and SOXOffice 365 environmentsMicrosoft Office 365 is a multi-tenant hyperscale cloud platform and an integrated experience of apps and services available to customers in several regions worldwide. Most Office 365 services enable customers to specify the region where their customer data is located. Microsoft may replicate customer data to other regions within the same geographic area (for example, the United States) for data resiliency, but Microsoft will not replicate customer data outside the chosen geographic area. This section covers the following Office 365 environments:
Use this section to help meet your compliance obligations across regulated industries and global markets. To find out which services are available in which regions, see the International availability information and the Where your Microsoft 365 customer data is stored article. For more information about Office 365 Government cloud environment, see the Office 365 Government Cloud article. Your organization is wholly responsible for ensuring compliance with all applicable laws and regulations. Information provided in this section does not constitute legal advice and you should consult legal advisors for any questions regarding regulatory compliance for your organization. Office 365 applicability and in-scope servicesUse the following table to determine applicability for your Office 365 services and subscription:
Audits, reports, and certificatesSOC 1 Type 2 reports for:
Frequently asked questionsHow can I use Microsoft SOX compliance to facilitate my organization's compliance process? When you migrate your applications and data to covered Microsoft cloud services, you can build on the attestations and certifications that Microsoft holds. Independent auditor reports attest to the effectiveness of controls that Microsoft has implemented to help maintain the security and privacy of your data. However, you're wholly responsible for ensuring your organization's compliance with all applicable laws and regulations. Resources |
What types of information must be protected by internal controls according to Sarbanes-Oxley?
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