The Sarbanes- Oxley Act refers to the jurisdictions that control the reporting and accounting of public companies. Unlike prior Acts in the financial industry, the Sarbanes- Oxley Act brought company executives into the responsibility of ensuring the conciseness of financial records and reports. Moreover, the Sarbanes- Oxley Act protects employees and other individuals that uncover malpractices in any public company ( Moeller, 2008) . Over the years, common malpractices in the financial sector have prompted capable investors to refrain from injecting their funds into public companies ( In Stein et al., 2015) . As a result, the Congress agreed upon passing the Act that facilitates transparency and provides punishment for individuals that violate the rules stipulated in the act. In this regard, this paper addresses the various attributes of the Sarbanes- Oxley Act, its purpose, and how the legal system enforces the act.
First, the Sarbanes- Oxley Act was passed to ensure that proper financial standards were maintained among public companies. Irregularities in the financial reporting and accounting of companies were a huge drawback for stakeholders who were given inefficient information. Moreover, the Sarbanes- Oxley Act was passed to create more stringent controls in the trading of securities and ensure that companies act responsibly in trading their financial assets ( Pain & Karmakar, 2007) . Therefore, the Sarbanes- Oxley Act serves several purposes that have enhanced the efficiency of the financial sector.
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Second, the Sarbanes- Oxley Act prompts companies to maintain effective internal controls for their financial processes ( Moeller, 2008) . In the past, auditors did not consider efficiency in enhancing the internal controls, but the act did away with the incompetence. Auditors can now face hefty punishments for the failure of installing realistic internal control measures for public companies ( Pain & Karmakar, 2007) . Internal controls provide transparency in public company transactions, financial recording, and processes that determine the correctness of financial reports. The internal controls used must also achieve adequacy in overseeing all financial operations in the company.
In the long run, potential investors to public companies are saved from fraudulent acts that companies may use to attract investments. Auditors can collude with company officials to manipulate financial records to attract investments ( In Stein et al., 2015) . Investor money is often lost where financial reports are manipulated. The maintenance of financial integrity improves the confidence of investors, hence driving financial gains in the economy. The third purpose of the Sarbanes- Oxley Act is to create corporate responsibility for irregularities that occur in public companies ( Moeller, 2008) . For example, every financial officer in public companies is responsible for any malpractice. The Act increased the nature of criminal punishments to discourage collusions among company officials.
Notably, the Sarbanes- Oxley Act is enforced in various ways to curb public company financial malpractices. The SEC is the main regulatory body that allows that Sarbanes- Oxley Act to implement the rules that are presented by the Act ( Moeller, 2008) . The Sarbanes- Oxley Act gives the securities regulatory body the ability to scrutinize the correctness of information presented. For example, the Act punishes individuals who destroy financial records to conceal financial malpractices that occur in accounting, storage, and reporting of finances.
Moreover, the falsification of the public company financial reports is punishable by fines or incarceration. In most cases, company executives are responsible for approving the integrity of financial records that public companies present (Kirsch & Practising Law Institute. 2010) . Therefore, the lack of prudence in the process can result in heavy punishment for the responsible company executive. The Sarbanes- Oxley Act also punishes public company officials for the wrongful retention of financial records ( Pain & Karmakar, 2007) . The Sarbanes- Oxley Act regulates the accounting processes that each public company uses by enforcing rules in accounting procedures. Additionally, the Act enforces the IT strategies used by companies to store and retrieve electronic records.
References
In Stein, S. G., In Schaberg, R. A., In Biddle, L. R., & Practising Law Institute, (2015). Financial institutions answer book, 2015: Law, governance, compliance . New York City: Practising Law Institute
Pain, A. K., & Karmakar, N. (2007). Corporate governance and Sarbanes Oxley Act: An introduction . Hyderabad, India: Ifai University Press
Moeller, R. R. (2008). Sarbanes-Oxley internal controls: Effective auditing with AS5, CobiT and ITIL . Hoboken, NJ: John Wiley & Sons.
Kirsch, C. E., & Practising Law Institute. (2010). Fundamentals of investment adviser regulation, 2010 . New York, NY: Practising Law Institute.
