What is the primary focus of the Sarbanes-Oxley Act of 2002?

The primary focus of the Sarbanes-Oxley Act of 2002 is to increase transparency in corporate financial activities. This legislation was enacted in response to a series of corporate scandals that shook investor confidence and called into question the accuracy of financial statements. The act aims to enhance corporate governance and accountability by establishing stricter regulations for financial reporting and internal controls.

One of the key aspects of the Sarbanes-Oxley Act is its requirement for publicly traded companies to establish robust internal controls and procedures for financial reporting. This is designed to prevent fraud and ensure that financial statements are accurate and reflect the true financial condition of the company. Additionally, the act increased the penalties for financial fraud and imposes stricter oversight of auditing processes.

By focusing on these areas, the Sarbanes-Oxley Act plays a critical role in restoring public trust in financial markets, protecting investors, and fostering ethical behavior within corporations.