What does the Sarbanes-Oxley Act of 2002 focus on?

The Sarbanes-Oxley Act of 2002 primarily focuses on enhancing auditing and accounting standards to protect investors from fraudulent financial reporting. This legislation was enacted in response to corporate scandals, such as those involving Enron and WorldCom, which revealed significant lapses in corporate governance practices and led to a loss of public trust in the financial markets.

The Act establishes stricter regulations on financial disclosures and aims to improve the accuracy and reliability of corporate financial statements. It requires companies to implement internal controls to ensure the integrity of financial reporting and holds senior executives accountable for the accuracy of financial information. By focusing on auditing and accounting standards, the Sarbanes-Oxley Act addresses the need for increased transparency, accountability, and oversight in corporate finance. These protections strive to enhance investor confidence and maintain the stability of financial markets.