Sarbanes–Oxley Act (SOX) (2002)

1) Link to the Text of the Act
Read the statute (15 U.S.C. § 7201 et seq.)

2) Why It Was Done
Passed in response to corporate scandals like Enron and WorldCom, SOX aimed to restore investor confidence by improving corporate governance, financial disclosures, and accountability of executives and auditors.

3) Pre-existing Law or Constitutional Rights
The Securities Acts of 1933 and 1934 required disclosures but lacked strong penalties for fraud and weak oversight of auditors. SOX created new structures and stricter standards.

4) Overreach or Proper Role?
Supporters say SOX was necessary to protect investors and stabilize markets. Critics argue compliance costs are especially burdensome for smaller companies.

5) Who or What It Controls

• Public companies (must establish internal controls and certify financial statements)
• CEOs and CFOs (personally certify reports)
• Auditors (regulated by the new Public Company Accounting Oversight Board – PCAOB)

6) Key Sections / Citations

• 15 U.S.C. § 7241 (CEO/CFO certification of reports)
• 15 U.S.C. § 7262 (internal control reports – Section 404)
• 15 U.S.C. § 7211 (creation of PCAOB)
• 18 U.S.C. § 1519 (criminal penalties for destroying records)

7) Recent Changes or Live Controversies

• Debate continues over the high costs of compliance, especially Section 404 internal controls
• PCAOB continues to evolve audit inspection standards
• Calls to modernize SOX in light of new financial technologies

8) Official Sources

• U.S. Code – Title 15, Chapter 98
• SEC – Sarbanes–Oxley Act

• Securities
• Finance
• Corporate Governance
• Business
• Investors