Sarbanes-Oxley Act of 2002 (West's Encyclopedia of American Law)
The Sarbanes-Oxley Act of 2002 (Public Company Accounting Reform and Investor Protection Act, Pub.L. 107-204, July 30, 2002, 116 Stat. 745, July 30, 2002) was enacted by Congress in the wake of corporate and accounting scandals that led to bankruptcies, severe stock losses, and a loss of confidence in the STOCK MARKET. The act imposes new responsibilities on corporate management and criminal sanctions on those managers who flout the law. It makes SECURITIES fraud a serious federal crime and also increases the penalties for WHITE-COLLAR CRIMES. In addition, it creates a new oversight board for the accounting profession.
During the 1990s, the stock market rose dramatically in value, fueled by the promise of the INTERNET revolution as well as large corporate MERGERS AND ACQUISITIONS. Several of that decade's changes produced severe consequences during the first years of the new century. The five major U.S. accounting firms developed consulting divisions that advised corporations on ways to maximize their profits. Their advice often clashed with the traditional auditing functions and standards of these accounting firms. At worst, the accounting firms forfeited their traditional oversight function and allowed or encouraged financial reporting practices that misled investors. On the corporate side,...
(The entire section is 1040 words.)
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