What is the Sarbanes-Oxley Act?

The Sarbanes-Oxley Act of 2002, commonly known as SOX, is a federal law that was enacted to improve corporate governance and financial transparency in response to a series of high-profile accounting scandals that shook the business world. It was named after sponsors Senator Paul Sarbanes and Representative Michael Oxley.

Key Aspects of the Sarbanes-Oxley Act

The Sarbanes-Oxley Act sets forth rules and requirements for public companies to follow in order to strengthen financial reporting and protect investors. Some of the key features of SOX include:

• Enhanced financial disclosures
• Independent audit committees
• Certification of financial statements by CEOs and CFOs
• Prohibition on certain non-audit services provided by auditors
• Increased penalties for corporate fraud

Impact on Businesses

SOX has had a significant impact on businesses, requiring them to adhere to stricter financial reporting standards, improve internal controls, and enhance transparency. While compliance with SOX regulations can be costly and complex, it has helped to restore investor confidence and hold corporate executives more accountable for their actions.