Sabanes-Oxley puts on pressure for complete and accurate records.
It has been little more than three years since the Sarbanes-Oxley Act was signed into law following the scandals at several high-profile companies such as Enron, Global Crossings, WorldCom, Tyco and Arthur Anderson. The Act was designed to provide a proper accounting framework and rules around corporate governance for any public company, wholly-owned subsidiary or private company preparing to go public that is doing business in the United States. The legislation’s stated objective is "to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws."
The hope was to achieve a radical reduction in the rash of corporate wrongdoing that would restore investor confidence. Corporate and individual investors lost billions of dollars, resulting in a significant negative impact on financial markets and investor trust. This led legislators to specify stiff penalties for corporations and corporate officers who don’t comply. For example, an officer found to be noncompliant could receive a jail sentence of as long as 10 years and a fine of $1 million, even if the noncompliance was unintentional. The maximum fine increases to $5 million and the maximum jail sentence goes to 20 years if it can be proven that noncompliance was intentional. In the words of President Bush, the legislation will “deter and punish corporate and accounting fraud and corruption, ensure justice for wrongdoers, and protect the interests of workers and shareholders.”
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