The Sarbanes-Oxley (SOX) Act of 2002 was signed into law in the United States to aid in protecting investors against fraudulent financial reporting. Besides, SOX introduced strict penalties to lawbreakers with new rules and regulations requiring the accountants, auditors, and other officers in a corporation to keep records in an organization strictly. The increased frauds in major oil and banking companies in American businesses led to the creation of SOX, which required reporting of financial records, thus resulting in financial transparency and improved access to capital markets by investors.
SOX Act enabled American businesses to eliminate fraudster activities that scared away investors. Besides, the Act aimed at protecting investors by ensuring the reliability and accuracy of the organization's disclosures. Provision for SOX involved Section 302, 404, and 802 (Nguyen & Dai Chu, 2019). Section 302 of the Act gives guidelines to corporate officials to certify that all financial reports by the company comply with the SEC requirements to encourage more investors to venture into the business. Section 404 calls for the management and the auditors to carry out internal controls to ensure the reporting method is adequate. Finally, section 804 dictates the three rules of saving, which includes the destruction of records, the period of storing the records, and the records that should be stored by the company. The Security and Exchange enforce SOX acts, which aids in the restoration of investors’ confidence to invest with the organization. The Act has been significant to businesses in America in carrying out transparent enterprises, thus creating a suitable environment for business development in America and across the globe.
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References
Nguyen, K. L., & Dai Chu, D. (2019). Corporate Governance: The long term impact of the Sarbanes-Oxley Act on Capital structure and Investment of firms. E| mporium , 1 (2). http://e-mporium.lincoln.ac.uk/e-mporium/index.php/e-mporium/article/view/58
