What Is Sarbanes-Oxley Act (SOX)?

Sarbanes-Oxley? Sounds like something you'd get at a dinner party. The Sarbanes-Oxley Act is a 2002 federal law that established the Public Company Accounting Oversight Board (PCAOB) to oversee the auditors of public companies. It also sets standards for public company boards and accounting firms, ensuring that management provides accurate financial reporting and internal controls. Sarbanes–Oxley, or SOX, is the most famous Act in American history. It's come up in conversation at least once a week for the past decade (especially if you're in the accounting industry). SOX was passed in 2002 after a massive financial scandal rocked Wall Street and led to the downfall of Enron. The Act aims to protect investors by ensuring that public companies are held accountable and transparent with their financial reporting. It also requires CEOs and CFOs of publicly traded companies to certify their financial reports, making it harder for them to hide mistakes or shady dealings. The Sarbanes-Oxley Act of 2002 was a massive deal for consultants. The Act, which passed in the wake of the Enron scandal and other corporate accounting scandals, was designed to protect investors by improving the accuracy and reliability of corporate financial statements. In practice, this meant that corporations had to spend a lot of time and money making sure they were doing everything correctly—and that's where consultants came in. The Sarbanes-Oxley Act set new rules for internal control, oversight and accountability at public companies—meaning companies with stock traded on exchanges or markets. This meant that corporate officers and managers had to learn about auditing standards, internal control procedures and ethics policies. They also had to hire independent auditors who could certify their financial statements on behalf of investors. Consultants got rich helping these companies comply with all these new rules—it's been pretty rough for them since then!