What is the purpose of the Sarbanes-Oxley Act?

The Sarbanes-Oxley Act is a United States federal law that was created in response to a series of major corporate and accounting scandals that undermined public trust in the stock market. It was enacted in 2002 and is also known as the Public Company Accounting Reform and Investor Protection Act. The purpose of this act is to protect investors by creating an environment where organizations must be honest and clear with their own financial records and reporting. Companies must also be held accountable to external audit and oversight. Additionally, it requires certain financial officers to certify the accuracy of financial reports and imposes punishments if false information is submitted. The act also sets standards for accounting firms and requires audits to be conducted independently. This ensures that any financial information is secure and not subject to manipulation. Furthermore, CEOs and CFOs are held personally liable for incorrect financial reports and must certify that their reports are accurate. The Sarbanes-Oxley Act has been credited with restoring faith in the stock market and providing an environment of trust, making it easier for investors to make informed decisions. It also has encouraged a corporate culture of transparency, accountability, and responsibility. Finally, it has enhanced the quality of financial reporting and increased investor confidence in the stock market.

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What is the purpose of the Sarbanes-Oxley Act?

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