Enacted back in July 30, 2002, the Sarbanes-Oxley Act of 2002 (was known as SOX, the Corporate, Auditing Accountability & IT Security Responsibility Act in the House, the Public Company Accounting Reform and Protection Act within the Senate, the Sarbanes-Oxley Act, Sarbox, and Pub.L. 107-204, 116 Stat. 745) is a federal law of the United States that set enhanced and new standards for all stateside public company boards, management corporations, and public accounting firms. The name of this bill is derived after its sponsors, U.S. Representative Michael G. Oxley (R-OH) and U.S. Senator Paul Sarbanes (D-MD). This ruling was pushed forward as a response to handle a large amount of major accounting and corporate scandals affecting those like WorldCom, Peregrine Systems, Adelphia, Tyco International, and Enron.
The SOX was enacted to stop the aforementioned scandals from happening again, especially in terms of restoring public trust in how multinational conglomerates handle their accounting and whatnot. The nation's securities markets were definitely shaken and affected by the collapse of the affected companies' share prices, especially when the public and investors found out that the reason why many billions of US$ dollars were wasted was because of the corporations' unhealthy and duplicitous accounting practices at the time. With that said, SOX doesn't apply to any privately held companies. There are eleven sections or titles within the act, and they range from criminal penalties to extra corporate board obligations.
In particular, the act necessitates the SEC or the Securities and Exchange Commission to employ policies on requirements to follow the new rulings. The 26th SEC chairman Harvey Pitt led SEC in the acceptance and implementation of dozens of policies to push through the Sarbanes-Oxley Act of 2002. This led to a new, nigh-public agency called the PCAOB or the Public Company Accounting Oversight Board; it's responsible for inspecting, disciplining, regulating, and overseeing accounting firms in terms of their jobs as public company auditors.
The SOX act also manages issues such as enhanced financial disclosure, internal control assessment, corporate governance, and auditor independence. It was first endorsed by the House with a vote of eight abstaining, three opposed, and four hundred twenty-three in favor. Meanwhile, the Senate had a vote of one abstaining and ninety-nine in favor. President George W. Bush earlier has signed the act into law while commenting that since the time of Franklin D. Roosevelt and his "New Deal" economic reforms, the Sarbanes-Oxley Act of 2002 contained the most comprehensive and extensive reforms in United States business traditions and practices.
The costs and benefits of SOX continue to be debated upon even at the present. Supporters of the bill say that the Sarbanes-Oxley Act was needed and it played a vital role in regaining lost public trust in the United States' capital markets by, for example, bolstering corporate accounting controls and limitations. Critics and detractors agree that the nation's competitive edge when it comes to international markets and foreign financial service providers have been significantly reduced by the bill because it's basically a needless complicated regulatory environment for American financial markets.
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