Background

SOX was enacted in 2002 in reaction to the string of major scandals that rocked certain U.S. companies. They include Enron, Tyco International and WorldCom.

Key Provisions

Some of SOX's provisions include mandatory accurate financial disclosure, audit reports on companies' internal control over financial reporting, and criminal penalties for those who violate the law. SOX also established the Public Company Accounting Oversight Board (PCAOB) to independently oversee public accounting firms.

Praise

In a USA Today article, Christopher Cox, the then-chairman of the U.S. Securities and Exchange Commission (SEC), praised SOX, stating the act increases corporate accountability, speeds up financial reporting, and makes audits more independent.

Criticism

U.S. Rep. Ron Paul, R-Texas, voiced his disapproval in a 2005 speech on the House floor, echoing the major criticisms of SOX: that its implementation costs too much, and that it could put U.S. businesses at a competitive disadvantage with foreign ones.

Legal Opposition

In 2006, the Free Enterprise Fund sued the PCAOB for unconstitutionality arguing that its officers should be appointed by the president instead of the Securities and Exchange Commission. The case was dismissed in a district court, and its decision was upheld in the Court of Appeals.

Source:

Sarbanes-Oxley Act (SOX)

USA Today: Sarbanes-Oxley Law Has Been a Pretty Clean Sweep; Greg Farrell; 2007

Repeal Sarbanes-Oxley!; Ron Paul; 2005

Resource:

Sarbanes-Oxley.com