The Sox Act

Sarbanes-Oxley Act (SOX Act) of 2002

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LAW/421

November 26, 2012

University of Phoenix

Sarbanes-Oxley Act (SOX Act) of 2002

Why was the Sarbanes-Oxley Act of 2002 created and how does it impact financial reporting today?

The Sarbanes-Oxley Act (referred to as SOX) turned into a law by vote of the legislature during 2002. The SOX Act directly influences the duties of auditors, board of directors, and company administrators with respect to fiscal reports. The SOX Act also set up the Public Companies Accounting Oversight Board (PCAOB). The oversight board is directly accountable for the oversight of fiscal reports audits of openly traded organizations and the establishment of auditing requirements in the United States of America. The objective of this Act was to aid in increasing the investor confidence in fiscal records that companies issued. Confidence was lost because of incorrect reporting, which lead to large amounts of money being lost by shareholders.

The SOX Act needed a complete change of the existing requirements of fiscal accounting and auditing requirements. While these requirements and rules are included within our current system, there will still be modifications, and additions to those terms throughout its time. One thing for certain is the board of directors, auditors, and company administrators have experienced a higher obligation to make sure correct and timely fiscal records are supplied to its shareholders.

Legal Issues

The SOX Act was written into law following the failure of several large companies. Take into account the issues from Enron and Adelphia where these corporations falsified papers and figures in fiscal reports, revealed to shareholders, so as to gain more shareholders under wrong expectations of investment earnings. The SOX Act ended the unethical Actions of large companies during the 1990’s that over-inflated their...