The Purpose of Sarbanes Oxley

The Sarbanes Oxley Act, passed by the U.S. House of Representatives in 2002, attempts to bring in improved principles and accountability in the operations of companies in the U.S. It has been considered as a major comprehensive legislation in recent years in US business security affairs. Non-compliance of the law attracts major penalties on company boards.

The purpose of Sarbanes Oxley (also called SOX or SarbOx) is to keep away large businesses from financial deception and misleading their investors and shareholders. Basically this act is for protecting the investors from public companies. It acts as a shield for investors from losing their asset unfairly. The investors are also prevented from being misguided into investing in business.

The Sarbanes Oxley Act contains eleven major sections, ranging from extra corporate board duties to punishment. SEC (Securities and Exchange Commission) looks after the implementation of the Sarbanes Oxley Act. It always checks that the issuers report and file records properly and timely. This activity again prevents companies from misleading or inaccurate financial standing.

Three important points of the SOX influence the management of company records. The first point restricts the destruction, alteration, and falsification of records or documents. If a person attempts these activities, he will face severe penalties and imprisonment. Second point is that the businesses must follow a set of guidelines concerning communications recording, audits, records etc. Though SarbOx Act keeps large corporations from fraudulent behavior, it has made certain accidental burdens on smaller businesses, making it difficult for them to grow and flourish. Compliance with this act is not a heavy task.