What is the primary purpose of the Sarbanes-Oxley Act (SOX)?

The primary purpose of the Sarbanes-Oxley Act (SOX) is to ensure accuracy and integrity in the financial reporting of public companies. This legislation was enacted in response to major financial scandals, such as Enron and WorldCom, which highlighted significant deficiencies in financial reporting and corporate governance. SOX instituted rigorous requirements for financial disclosures, requiring companies to implement internal controls and procedures for financial reporting. This focus on transparency is designed to protect investors and restore confidence in the financial markets following these crises. It emphasizes accountability for corporate executives and enhances the responsibilities of boards of directors regarding financial oversight. The aim is to prevent fraudulent activities and safeguard the interests of shareholders and the general public by ensuring that financial statements reflect the true economic condition of an organization.