Describe the purpose of the Sarbanes-Oxley Act (SOX).

The Sarbanes-Oxley Act (SOX) was enacted in response to major corporate and accounting scandals that shook investor confidence in financial markets, particularly in the early 2000s. The primary purpose of SOX is to protect investors from fraudulent financial reporting by corporations. It introduced stringent reforms to enhance corporate governance and accountability, which significantly increased the requirements for financial disclosures from public companies.

This act mandates that companies establish robust internal controls and procedures for financial reporting. Additionally, it holds executives accountable for the accuracy of financial statements, thereby ensuring that investors are presented with truthful and transparent reports about the company’s financial health. By implementing these regulations, SOX aims to restore public trust in financial markets, protect investors from deceitful business practices, and ultimately support the integrity of the accounting profession.

The other options do not accurately capture the main intent of SOX. The act does not focus on standardizing global accounting practices, ensuring compliance with data protection regulations, or regulating financial market stability as its primary functions. These aspects are addressed through other frameworks and regulations, showing that SOX’s specific aim is concentrated on preventing fraudulent financial practices.