As management accountants know, the Sarbanes-Oxley Act of 2002 (SOX) was Congress's response to the wave of corporate scandals, such as WorldCom and Enron, that had begun to devastate investor confidence in the U.S. The law was intended to protect shareholders, make financial reporting more transparent, and restore investor confidence. But Sections 302 and 404 have led to debate about this among U.S. companies as well as foreign firms (foreign private issuers, or FPIs) that trade on U.S. stock exchanges.
Prior to SOX, the Securities & Exchange Commission (SEC) had a history of granting exceptions to FPIs because of disparities between the laws and practices in the U.S. and the issuers' home countries. But Sarbanes-Oxley applies to all companies listed with the SEC, including foreign firms.
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