[2] The bill was enacted as a reaction to a number of major corporate and accounting scandals, including those affecting Enron, Tyco International, Adelphia, Peregrine Systems, and WorldCom.

These scandals cost investors billions of dollars when the share prices of affected companies collapsed, and shook public confidence in the US securities markets.

President George W. Bush signed it into law, stating it included "the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt.

"[5] In response to the perception that stricter financial governance laws are needed, SOX-type regulations were subsequently enacted in Canada (2002), Germany (2002), South Africa (2002), France (2003), Australia (2004), India (2005), Japan (2006), Italy (2006), Israel, and Turkey.

Opponents of the bill have claimed it has reduced America's international competitive edge because it has introduced an overly complex regulatory environment into US financial markets.

[7] Proponents of the measure said that SOX has been a "godsend" for improving the confidence of fund managers and other investors with regard to the veracity of corporate financial statements.

[8] The 10th anniversary of SOX coincided with the passing of the Jumpstart Our Business Startups (JOBS) Act, designed to give emerging companies an economic boost, and cutting back on a number of regulatory requirements.

The spectacular, highly publicized frauds at Enron, WorldCom, and Tyco exposed significant problems with conflicts of interest and incentive compensation practices.

The House then referred the "Corporate and Auditing Accountability, Responsibility, and Transparency Act" or "CAARTA" to the Senate Banking Committee with the support of President George W. Bush and the SEC.

On June 25, 2002, WorldCom revealed it had overstated its earnings by more than $3.8 billion during the past five quarters (15 months), primarily by improperly accounting for its operating costs.

[17] On July 30, 2002, President George W. Bush signed it into law, stating it included "the most far-reaching reforms of American business practices since the time of Franklin D.

According to a 2019 study in the Journal of Law and Economics, "We find a large decline in the average voting premium of US dual-class firms targeted by major SOX provisions that enhance boards' independence, improve internal controls, and increase litigation risks.

In contrast, they find that the likelihood of a U.S. listing among small foreign firms choosing between the Nasdaq and LSE's Alternative Investment Market decreased following SOX.

[40] External auditors are required to issue an opinion on whether effective internal control over financial reporting was maintained in all material respects by management.

It shall be unlawful, in contravention of such rules or regulations as the Commission shall prescribe as necessary and appropriate in the public interest or for the protection of investors, for any officer or director of an issuer, or any other person acting under the direction thereof, to take any action to fraudulently influence, coerce, manipulate, or mislead any independent public or certified accountant engaged in the performance of an audit of the financial statements of that issuer for the purpose of rendering such financial statements materially misleading.

This is the most costly aspect of the legislation for companies to implement, as documenting and testing important financial manual and automated controls requires enormous effort.

These two standards together require management to: SOX 404 compliance costs represent a tax on inefficiency, encouraging companies to centralize and automate their financial reporting systems.

The Committee of Sponsoring Organizations (COSO) Report, as the framework became known, was the first-ever attempt in corporate America to establish a universal definition of Internal Controls, along with proposed guidelines for governance, independence and quality assurance.

Outside auditors of non-accelerated filers however opine or test internal controls under PCAOB (Public Company Accounting Oversight Board) Auditing Standards for years ending after December 15, 2008.

The reason for the timing disparity was to address the House Committee on Small Business concern that the cost of complying with Section 404 of the Sarbanes–Oxley Act of 2002 was still unknown and could therefore be disproportionately high for smaller publicly held companies.

[56] Section 806 prohibits a broad range of retaliatory adverse employment actions, including discharging, demoting, suspending, threatening, harassing, or in any other manner discriminating against a whistleblower.

However, according to Dan Whalen of the accounting research firm Audit Analytics, the threat of clawbacks, and the time-consuming litigation associated with them, has forced companies to tighten their financial reporting standards.

According to a survey by Korn/Ferry International, Sarbanes–Oxley cost Fortune 500 companies an average of $5.1 million in compliance expenses in 2004, while a study by the law firm of Foley and Lardner found the Act increased costs associated with being a publicly held company by 130 percent.A research study published by Joseph Piotroski of Stanford University and Suraj Srinivasan of Harvard Business School titled "Regulation and Bonding: Sarbanes Oxley Act and the Flow of International Listings" in the Journal of Accounting Research in 2008 found that following the act's passage, smaller international companies were more likely to list in stock exchanges in the U.K. rather than U.S. stock exchanges.

SEC Chairman Christopher Cox stated in 2007: "Sarbanes–Oxley helped restore trust in U.S. markets by increasing accountability, speeding up reporting, and making audits more independent.

"[76] The 2007 FEI study and research by the Institute of Internal Auditors (IIA) also indicate SOX has improved investor confidence in financial reporting, a primary objective of the legislation.

The fraud was first reported to the SEC in 2004 by the then Value Line Fund (Nasdaq: VLIFX) portfolio manager and Chief Quantitative Strategist, Mr. John (Jack) R. Dempsey of Easton, Connecticut, who was required to sign a Code of Business Ethics as part of SOX.

[85] Indeed, courts have held that top management may be in violation of its obligation to assess and disclose material weaknesses in its internal control over financial reporting when it ignores an employee's concerns that could impact the company's SEC filings.

[92] On June 28, 2010, the United States Supreme Court unanimously turned away a broad challenge to the law, but ruled 5–4 that a section related to appointments violates the Constitution's separation of powers mandate.

[93] In its March 4, 2014 Lawson v. FMR LLC decision the United States Supreme Court rejected a narrow reading of the SOX whistleblower protection and instead held that the anti-retaliation protection that the Sarbanes–Oxley Act of 2002 provided to whistleblowers applies also to employees of a public company's private contractors and subcontractors, including the attorneys and accountants who prepare the SEC filings of public companies.

[96][97][98] On June 28, 2024, the U.S. Supreme Court issued a ruling that found obstruction under the law was only intended to apply to more limited circumstances involving forms of evidence tampering and couldn't be used for broader prosecutions.