Question

The Sarbanes-Oxley Act (short name “SOX”) was an important piece of legislation passed in 2002 that has forever changed the face of corporate accountability. discuss the significance and implications of SOXact for the publicly listed corporations?

Answer 1

The Sarbanes-Oxley Act (2002) laid down significant auditing and financial regulations for public companies. The Act was passed in response to many financial frauds and scandals that occurred in the US corporate world in the early 2000s. The federal law was passed by the US Congress to protect shareholders, especially minority shareholders, employees and the public in general from fraudulent accounting practices. It is enforced by the Securities and Exchange Commission. A Public Company Accounting Oversight Board was created to oversee the accounting industry. Company loans to company executives were banned. Whistle-blowers were given protection and set standards for audit reports. All public companies auditors had to register themselves with the Board. The Board inspects, investigates and enforces the firm’s compliance. Companies should also appoint an independent auditor to review their accounts. Auditors cannot provide consultancy services to the companies they are auditing. The CEOs are held personally liable for accounting errors.