What is the main purpose of the Sarbanes-Oxley Act (SOX)?

The main purpose of the Sarbanes-Oxley Act (SOX) is indeed to regulate company accounting practices. This landmark piece of legislation was enacted in response to major corporate and accounting scandals, including those involving Enron and WorldCom. The intent behind SOX was to protect investors by improving the accuracy and reliability of corporate disclosures.

One of the key components of SOX is the requirement for companies to establish robust internal controls for financial reporting. This ensures that companies are adhering to more stringent accounting practices and decreases the likelihood of fraudulent financial reporting. Furthermore, SOX also established standards for public company boards, management, and public accounting firms, thereby enhancing accountability and integrity in financial reporting.

While enhancing corporate governance, improving transparency in the markets, and reducing operational risk are important objectives that arise from the implementation of SOX, they serve as secondary outcomes to the main goal of regulating and improving accounting practices.