With the advent of the Sarbanes Oxley Act of 2002, publicly traded organizations diverted focus and resources from traditional operational reviews to full-on compliance efforts to satisfy the new reporting requirements.
Sarbanes-Oxley was placed into law in 2002 and was formed in response to numerous high-profile failures of several of the world’s most respected and admired institutions. Borne in part from greed, yet facilitated by years of gradual divergence from a focus on fundamental internal controls, executives of the failed institutions saw an opportunity to further personal objectives. Through creative financing agreements and in many cases, blatant theft through disbursements fraud, investors lost money and honest employees lost jobs.
The Sarbanes-Oxley Act, named after senators Rick Sarbanes and Bill Oxley, requires publicly traded companies to provide an assertion regarding the design and operating effectiveness of its internal controls over financial reporting and disclosures. The act itself is comprised of 11 titles and included the formation of the Public Company Accounting and Oversight Board (PCAOB).
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