Sarbanes Oxley Act

federal law enacted in 2002 that introduced major reforms in corporate governance and financial reporting. The act (also called the Corporate Responsibility Act) is regarded as the most sweeping securities legislation since the securities and exchange act of 1934, which established the Securities and Exchange Commission and federal regulation of the securities industry. Among its provisions, Sarbanes-Oxley established an independent five-member watchdog agency, the Public Company Accounting Oversight Board (PCOAB), to oversee audits of public company financial statements; required corporate financial officers to certify accuracy of financial statements; required public companies to certify in annual reports the effectiveness of internal controls on financial reporting; banned corporate loans to executives and directors; and required companies to have procedures for handling whistleblower complaints concerning questionable accounting or auditing practices.