Reference no: EM133392730

Sarbanes Oxley Act

The Sarbanes-Oxley Act of 2002 is a law the U.S. Congress passed on July 30 of that year to help protect investors from fraudulent financial reporting by corporations. (Kenton, 2022) The intent of this act is for corporations to show transparency when reporting their finances. This strict governance would ensure that companies are held accountable (certifying that their financial statements are correct), being more accurate with their reports (reports being checked by outside auditors that has no ties to the business) and by protecting investors. Compared to the initial act, well in the past with scandals with companies such as Enron, today now has a positive effect on how companies operate. It has helped the financial market as companies are more cognizant of the roles they assign to their CEOs for example, thus decreasing the cause of conflicts of interest. Based on how other companies have unethically disclosed financial information, this act was necessary to properly govern the financial market.