Sarbanes-Oxley
The Sarbanes-Oxley Act of 2002 was created by sponsors U.S. Senator Paul Sarbanes(D-MD) and U.S. Representative Michael G. Oxley (R-OH) in response to very public corporate fraud and accounting scandals. In a seemingly short period of time, Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom all collapsed. The majority of these scandals resulted from the inaccurate reporting of financial transactions. The financial statements of these organizations were so gravely misrepresented and misstated that once the organizations' records were presented fairly, it caused the total collapse of the company. As a result of these scandals, investors lost billions of dollars when the share prices collapsed, and the public lost confidence in the nation's securities markets and the auditor who were supposed to protect the public's interest. The Sarbanes-Oxley Act applies to all public companies in the U.S. and international companies that have registered equity or debt securities with the Securities and Exchange Commission as well as the accounting firms that provide auditing services to them. The Act mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures, combat corporate and accounting fraud, and created the "Public Company Accounting Oversight Board," also known as the PCAOB, to oversee the activities of the auditing profession. The Sarbanes-Oxley Act also created new penalties for acts that were unethical, negligent or fraudulent. It hoped to change how corporate boards and executives interacted with each other and with corporate auditors. Its aim is to remove the defense/excuse of "I wasn't aware of or didn't know about the financial issues regarding the company" from CEOs and CFOs. It aims to hold management accountable for the accuracy of the financial statements in order to protect the shareholders and others that rely on those financial statements. The Act also specifies new financial reporting responsibilities,