By Joan Honig, DocuWare: The Sarbanes-Oxley Act (SOX) of 2002 was passed to prevent accounting fraud and help shore up investor confidence in securities markets. It was created in response to a series of corporate scandals involving companies such as Enron, WorldCom, Peregrine Systems and Tyco International. Investors were misled by these companies’ financial reports, and those of others like them, and lost a significant amount of money when these stocks took a nosedive.
For example, Enron, once one of the most successful companies in the world, collapsed once fraud was discovered. According to Investopedia, Enron shares that once traded as high as $90.75 descended to around $0.26 after company management’s deception was revealed.
The purpose of SOX: Reducing corporate fraud