What is the main goal of the Sarbanes-Oxley Act?

The primary aim of the Sarbanes-Oxley Act, enacted in response to major corporate scandals, is to ensure corporate financial transparency and reliability. This legislation was designed to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprises. It mandates strict reforms to improve financial disclosures from corporations, thereby holding them accountable for their financial reporting.

The act introduced measures such as requiring companies to maintain accurate financial records and established internal controls to audit these records. It also created the Public Company Accounting Oversight Board (PCAOB) to oversee the audits of public companies. By doing so, it fosters trust in the financial statements provided by organizations, thereby enhancing the integrity of the financial markets as a whole. This foundational focus on transparency is essential for maintaining investor confidence and promoting accountability in corporate governance.