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Sarbanes-Oxley Act (SOX)
The Sarbanes-Oxley Act is a federal regulation that came with some wide-ranging modifications to the financial deeds of businesses. The 2002 act is specifically targeted at corporations that are publicly held, their in-house financial controls, and their reporting procedures on financial audits performed on them by independent auditing firms. The regulation was enacted to provide solutions for some scandals that took place between 2000 and 2002 in the world of corporate accounting. In particular, it was put in place to respond to extensive fraud at Enron and other organizations, as well as establish new standards for corporate management and public accounting. Because of it, the mentioned firms nowadays have to guarantee the authenticity of their auditing data.
Enron Scandal
Enron was a large publicly traded company that invested in the energy sector. At the time of its existence, the state had deregulated the oil and gas sector, and Enron had successfully applied for the deregulation. However, because of this government policy, its high-ranking employees discovered a loophole through which they could embezzle investor funds. They misrepresented the performance of the company mainly by not indicating the true nature of the losses it was making. Because of its false profitability image, investors kept investing, and the top employees continued to embezzle the funds until the o…