What is the purpose of the Sarbanes-Oxley Act?

The Sarbanes-Oxley Act (also known as SOX) was created in 2002 in response to financial scandals that had occurred in the wake of the dot-com crash. This legislation aimed to protect investors from unethical accounting and corporate fraud. It sought to do this by setting strict standards for financial reporting, establishing safeguards against fraudulent activity, and making penalties for noncompliance harsher. The Sarbanes-Oxley Act also called for the creation of the Public Company Accounting Oversight Board (PCAOB). The PCAOB is an independent body that is charged with setting auditing standards and conducting regular quality control checks on auditors. The goal of this board is to ensure that public companies are accurately and truthfully reporting their financial data. The SOX Act also established the Financial Accounting Standards Board (FASB). This non-profit organization sets the standards for financial reporting that publicly traded companies must follow. The FASB is responsible for establishing financial statements such as balance sheets and income statements which are released quarterly and yearly. In North Carolina, the Sarbanes-Oxley Act (SOX) is relevant because it seeks to prevent instances of investment fraud. For this reason, the North Carolina Department of Justice recommends that investors proceed with caution and conduct due diligence before investing their money. This includes researching the company’s financial reports and making sure that the company is compliant with all regulations set forth by the FASB and PCAOB.

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What is the purpose of the Sarbanes-Oxley Act?

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