Sarbanes-Oxley Act 2002
The Sarbanes-Oxley Act of 2002 is one of the most important legislations passed in the 21st century effecting financial practice and corporate governance. This act was passed on July 30, 2002 by Representative Michael Oxley a republican from Ohio and Senator Paul Sarbanes a democrat from Maryland. They both passed two different bills that pertain to the same problem which had to do with corporation's auditing accountability and financial fraud problems within corporations. One was bill (S. 2673) brought by Senator Sarbanes and the other bill (H. R. 3763) brought by Representative Oxley. Both bills where passed separately one by the house and the other by the senate but after WorldCom revealed to the public that they had overstated its earnings "by more than $72 billion dollars during the past five quarters." (en.wikipedia.org) the house and the senate decided to form a conference committee to bring both bills together to form a stronger one. The conference committee approved the final bill on July 24th, 2002, giving it the name of "the Sarbanes-Oxley Act of 2002" and on July 30th, 2002, President Bush signed it making it a law (en.wikipedia.org).
SOX’s main purpose is to fight against financial statement fraud in the United States. It was put in place to protect investors and prevent a repeat similar to the past corporate and accounting scandals that occurred in the past, such as Enron, WorldCom, Tyco International, and may others. What a lot of these scandals had in common were that they engaged in skewed reporting of selected transactions. The mentioned companies misrepresented a variety of questionable transactions that ultimately cost investors billions of dollars.
The U.S. Securities and Exchange Commission and various regulatory laws such as the Sarbanes-Oxley Act helps to protect investors by improving the accuracy and reliability of the reporting of financial information reported by...