In the year 2002, huge financial scandals involving renowned companies like Enron and the telephone giant WorldCom had created quit the hype within the business world. This established a definite need for controlling public trading in the United States. Therefore, US Senator Paul Sarbanes along with Representative Michael G. Oxley came up with a new law termed as the Sarbanes-Oxley Act.
Commonly known as the SOX Compliance in the business industry, this law presented new-fangled, exacting standards to be followed in coordination with best practices. Though these rules are not applicable for private companies, they provide a kind of security to all employees and investors working in the public trades sector.
The Act itself is overseen by the SEC (Securities and Exchange Commission) which makes sure that all public companies are abiding the federal law’s rules and regulations along with firm compliance to best practices.
The Sarbanes-Oxley Act is also responsible for forming an agency known as the Public Company Accounting Oversight Board (PCAOB). This agency keeps a regular tab on accounting firms that carry out the auditing process for public companies. PCAOB makes sure that these firms are following rules established by the government overlooking and inspecting each and every move. It can be safely said that this agency is kind of a disciplinary authority that auditing firms are direly in need of.
A spread over sixty six page, this Act is designed to provide protection for investors who are investing billions of dollars in the public trade industry. It is also responsible for improving the precision and dependability of corporate revelations made compatible with the laws of security and other different purposes.
There have been several sore views about this Act implying that it was too strict and lavish for American companies putting them in distress. The Act has also been criticized for holding public companies back on an international trading level.