What is the primary goal of the Sarbanes-Oxley Act?

The primary goal of the Sarbanes-Oxley Act is to fundamentally improve the accuracy and reliability of corporate disclosures and to protect investors from accounting fraud and corporate misconduct. This legislation was enacted in response to major financial scandals and collapses in the early 2000s, with the intention of restoring public confidence in the financial markets by ensuring that companies adhere to strict standards for financial reporting and internal controls.

The act imposes rigorous auditing and financial reporting regulations, requires senior executives to take responsibility for the accuracy of financial statements, and increases penalties for fraudulent activities. This focus on fighting accounting and corporate fraud directly addresses the need for transparency and integrity in financial reporting, making it the core mission of the Sarbanes-Oxley Act.

While enhancing IT security, reducing market volatility, and increasing investor confidence are relevant aspects associated with sound corporate governance, they are not the central objective of the Sarbanes-Oxley Act. The legislation primarily targets the prevention of fraud and the protection of shareholders by ensuring truthful and full disclosure of a company’s financial status.