The Sarbanes-Oxley Act, passed in 2002, is aimed primarily at public accounting firms who participate in audits of corporations. It was passed in response to a number of corporate accounting scandals that occurred between 2000-2002 (Peavler, n.d). This act set new standards for public accounting firms, corporate management, and corporate boards of directors. Sarbanes-Oxley, or SOX, is a federal law that is the most comprehensive reform of business practices since Franklin D. Roosevelt was President of the U.S. and passed the New Deal.
What caused the need for the Sarbanes-Oxley Legislation? The Enron scandal was certainly enough to show the American public and its representatives in Congress that new compliance standards for public accounting and auditing had to be put into place. Enron was one of the biggest and, it was thought, one of the most financially sound companies in the U.S. Enron was perhaps the catalyst for the Sarbanes-Oxley legislation. Enron stands for the greatest company scandal in the history of the US economy and has become a symbol of corruption for the whole Western economic system.
In 2001, the nation was rocked by the collapse of Enron, a multibillion dollar corporation that employed thousands of people and had affiliations right up to and including The White House itself. Amid the financial chaos and destroyed lives and reputations the collapse left in its wake, questions arose concerning exactly how the catastrophe occurred, why it occurred, and who was involved (Raver, 2006). Enron purchased and sold gas and oil futures. It built oil refineries and power plants. Enron became one of the world’s largest pulp and paper, gas, electricity, and communications companies before it bankrupted in 2001 (Amadeo, n.d.). Prior to Enron’s bankruptcy, the government stepped in and deregulated the oil and gas industry. Because of the deregulation, Enron