It has now been 10 years since the introduction of the Sarbanes-Oxley Act which is also known as the 'Public Company Accounting Reform and Investor Protection Act’. It act was passed in the times of accounting trickery and corporate fraud. The ‘SOX’ Act was designed to recover accountability and transparency in companies by strengthening controls over company accounts and by allowing criminal charges to be forced on executives involved in fraud. Corporate executives are required to certify financial statements and if necessary, it is possible to impose jail sentences for up to 20 years for violations.
The Act was proposed in order to increase investor confidence, which had been damaged by the number of major corporate and accounting scandals which cost investors billions of dollars. These included those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom when the share prices of these companies collapsed. Although the road to implementing the SOX Act was not easy, it has managed to achieve much more than it was intended too. Companies have begun to understand that SOX-related compliances and controls help to reduce risks. The act has helped to increase profits while safeguarding stakeholder’s investments.