Video: SOX 2002 Penalties

This lesson discusses the penalties associated with violations of the Sarbanes-Oxley Act (SOX) 2002. The penalties aim to protect the integrity of an audit and financial statements. They include a 20-year prison sentence for altering documents protected by the SOX Act, a 10-year sentence for auditors who fail to retain work papers for seven years after the audit or review, and fines and imprisonment for no more than 20 years for knowingly executing or attempting to execute security fraud. Additionally, the lesson explains the concept of the statute of limitations and its application to securities fraud cases. Key points and timeframes are essential to memorizing for the exam.

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Video Transcript

Instructor: Nick Palazzolo

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Well, in addition to creating the audit committee and some other aspects in the accounting world, SOX 2002 also created some penalties. And these penalties are there to protect the integrity of an audit, the integrity of financial statements. What are these penalties? Well, you will receive 20 years in prison for altering. This is editing, destroying, covering up, modifying, forging documents protected by the Sarbanes-Oxley Act. And this is going to really have an encompassing effect if you are modifying bank statements, if you are editing audit work papers, if you're changing any documents that can prove that the financial statements are correct, anything in that nature, loan agreements, legal documents, any altering evidence is going to land you 20 years in the slammer. And you don't want that. So don't commit any fraud. Don't change the documents. Keep them in their original source. You will receive 10 years in prison if you're an auditor and you don't retain your work papers for seven years after the end of the fiscal period in which the audit or review was conducted. So seven years, make sure you memorize all these dates. You're familiar with them. Now, why seven years? It's just what they agreed upon. And what's the point here? Well, auditors have to retain their work papers, which is proof of how the audit was conducted for seven years. After that, you can destroy them. We want to make sure that if the government wants to investigate how we conducted an audit because maybe there was fraud in that company and we missed it, they want to look at our work papers, see if we just didn't do a good job auditing. It's just proof, right? If there's any investigations that happen through this, those work papers are there

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