SOX does this by strengthening corporate governance, specifically broadening the powers and responsibilities of the audit committee of the board of directors. The law states that its purpose is “to protect investors by improving the accuracy and reliability of corporate disclosures.” SOX was passed in response to numerous large corporate fraud scandals in the early 2000s.
They are committed to maintaining effective internal controls and an internal control structure that provides valid, reliable financial data. Not only does this information benefits investors it also demonstrates that the chief executive officer, chief financial officer, and other senior executives are committed to the accuracy of an organization’s financial statements. Section 404 of the Sarbanes-Oxley Act (SOX), a federal law enacted in 2002, requires every public company to report its internal control procedures for the company’s financial statements in its annual report.
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