Final answer:
The Sarbanes-Oxley Act of 2002 aimed to protect investors by increasing confidence in the financial reports of public companies, and ensuring the prevention of accounting fraud through measures such as personal certification of financial reports by CEOs and CFOs, and establishing independent audit committees.
Step-by-step explanation:
Sarbanes-Oxley Act Objectives
The Sarbanes-Oxley Act of 2002, also known as SOX, was enacted to protect investors and restore trust in the financial reports of public companies. Following several high-profile corporate accounting scandals, including those involving Enron, Tyco International, and WorldCom, there was a clear need for stronger oversight and regulations in financial practices. The primary goals of the Sarbanes-Oxley Act were to increase confidence in financial information released by corporations and to ensure that accounting fraud would be much harder to commit.
The Act introduced major changes to the regulation of corporate governance and financial practice, focusing on accountability, transparency, and internal controls regarding finance and accounting procedures. Measures were implemented such as requiring the CEO and CFO to personally certify the accuracy of financial statements, the establishment of an independent audit committee, and increased penalties for fraudulent financial activities. These reforms were aimed at improving the reliability of corporate disclosures and safeguarding the investment community.