Sarbanes-Oxley Act

What Does Sarbanes-Oxley Act Mean?

The Sarbanes-Oxley Act (also abbreviated SOX), is a US Federal law enacted on July 30, 2002 that set a broad range of new standards for public companies, boards and accounting firms. It establishes a Public Company Accounting Oversight Board (PCAOB) to oversee the auditors of public companies. The Sarbanes-Oxley Act does not apply to privately held companies.


The Act also goes by the titles: Public Company Accounting Reform and Investor Protection Act by the US Senate; Corporate and Auditing Accountability and Responsibility Act by the US House of Representatives; and is also commonly referred to as Sarbanes–Oxley or Sarbox.

Techopedia Explains Sarbanes-Oxley Act

Sarbanes-Oxley was/is an effort to help prevent such accounting scandals in the aftermath of those occurring at Enron, WorldCom, Adelphia, Peregrine Systems and Tyco International. These scandals diminished trust in US corporations and cost investors billions of dollars when share prices collapsed and the nation’s security markets were severely shaken.

While this is a legal/business concept, it is important to an IT professional as a result of the huge amount of work spent by large corporations in complying with the law. Years following the Act were very good for consultants with the skills to assist large corporations with the transition.

Margaret Rouse

Margaret is an award-winning technical writer and teacher known for her ability to explain complex technical subjects to a non-technical business audience. Over the past twenty years, her IT definitions have been published by Que in an encyclopedia of technology terms and cited in articles by the New York Times, Time Magazine, USA Today, ZDNet, PC Magazine, and Discovery Magazine. She joined Techopedia in 2011. Margaret's idea of a fun day is helping IT and business professionals learn to speak each other’s highly specialized languages.