What does the Sarbanes-Oxley Act (SOX) primarily aim to improve?

The Sarbanes-Oxley Act (SOX) primarily aims to improve corporate transparency. Enacted in response to major corporate scandals in the early 2000s, such as Enron and WorldCom, SOX was designed to enhance the accuracy and reliability of corporate disclosures and financial reporting. The law imposes strict regulations on financial practices and corporate governance, ensuring that companies provide clear and truthful information to stakeholders, including investors, employees, and regulators.

One key aspect of SOX is the requirement for publicly traded companies to establish internal controls over financial reporting and to have their financial statements audited. This increased scrutiny helps to prevent fraudulent activities and promotes ethical practices within organizations. By holding companies accountable for their financial disclosures, SOX enhances transparency, which is essential for maintaining investor trust and the overall integrity of the financial markets.

The other options focus on different areas: employee rights concern labor laws and protections; environmental regulations address company responsibilities towards environmental sustainability; and consumer protection involves laws aimed at safeguarding buyers from unfair business practices. However, the primary focus of SOX is squarely on improving corporate transparency and the integrity of financial reporting.