What does the Sarbanes-Oxley Act (SOX) aim to improve?

The Sarbanes-Oxley Act (SOX) aims to improve the accuracy and reliability of corporate disclosures to protect investors. This legislation was enacted in response to major corporate and accounting scandals, such as the Enron and WorldCom crises, which eroded investor trust and highlighted the need for stricter financial reporting and auditing standards.

SOX establishes stringent requirements for financial reporting and increases penalties for fraudulent financial activities, ensuring that companies maintain transparency and integrity in their communications regarding financial performance. This focus on accurate corporate disclosures is essential to maintaining investor confidence and ensuring that markets function fairly.

While corporate tax regulation, market competition, and consumer protection laws have their importance, they are not the primary focus of the Sarbanes-Oxley Act. Instead, SOX specifically targets corporate governance and accountability, emphasizing the need for reliable information that stakeholders can trust when making investment decisions.