Final answer:
SOX compliance requires publicly traded companies to establish robust financial reporting controls, undergo independent audits, and have CEO and CFO certifications. It was created to protect investors and increase confidence in the financial markets following major corporate scandals.
Step-by-step explanation:
Compliance with the Sarbanes-Oxley Act (SOX) means that publicly traded firms must implement stronger internal controls and reporting procedures. This is to ensure the accuracy and reliability of financial statements. SOX also requires companies to have regular audits conducted by independent auditors, along with CEO and CFO certifications of the financial reports. The aim is to protect investors and restore confidence in the financial markets after scandals such as Enron and WorldCom. The act also established penalties for fraudulent financial activity and created the Public Company Accounting Oversight Board (PCAOB) to oversee the activities of the auditing industry.