{"id":352709,"date":"2016-04-04T10:42:08","date_gmt":"2016-04-04T15:42:08","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/consumer\/securities-law\/what-is-the-sarbanes-oxley-act.html"},"modified":"2024-05-07T12:59:00","modified_gmt":"2024-05-07T17:59:00","slug":"what-is-the-sarbanes-oxley-act","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/consumer\/securities-law\/what-is-the-sarbanes-oxley-act.html","title":{"rendered":"What Is the Sarbanes-Oxley Act?"},"content":{"rendered":"\n
\n \n
\n

What Is the Sarbanes-Oxley Act?<\/h1>\n
\n
\n By Oni Harton, J.D.<\/a> | Legally reviewed by Melissa Bender, Esq.<\/a>\n | Last reviewed\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
\n

This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
\n

The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Named for its sponsors, U.S. Senator Paul Sarbanes and U.S. Representative Michael Oxley, the Sarbanes-Oxley Act of 2002 (SOX or the "Act") established far-reaching auditing and financial regulations for public companies. It reformed corporate financial reporting and the accounting profession.<\/p>\r\n

Congress passed the Sarbanes-Oxley Act in 2002<\/a> after a string of corporate scandals. There were high-profile financial scandals involving publicly traded companies, including Enron, WorldCom, and Tyco. These scandals highlighted the need for regulatory intervention concerning corporate responsibility and corporate governance.<\/p>\r\n

The Sarbanes-Oxley Act sought to improve the reliability of public companies’ financial reporting and restore investor confidence following the corporate scandals. There were revelations that corporate officers and executives filed misleading financial statements. Blatant conflicts of interest and cozy relationships between accounting firms and the companies they audited were common.<\/p>\r\n

The Sarbanes-Oxley Act sought to enhance the reliability of corporate financial reporting and better regulate the accounting profession. It primarily sought to regulate audit services, financial reporting, and other business practices at publicly traded companies<\/a>. But some provisions apply to all companies. This includes private companies and non-profit organizations.<\/p>\r\n

The Act also established a means for enforcement actions. Non-compliance with Sarbanes-Oxley provisions results in enforcement actions.<\/p>\r\n

Sarbanes-Oxley regulations are discussed in more detail below. See FindLaw’s Securities Law<\/a> section for more articles and topics related to the securities industry.<\/p>\r\n

Overview of the Sarbanes-Oxley Act<\/h2>\r\n

Federal securities law mandates that publicly traded companies file periodic financial reports. These reports relating to the financial condition of the company serve several purposes. These periodic reports, required by federal law, provide the public with important financial information regarding the company’s:<\/p>\r\n